Network and method for trading derivatives

• US 7,818,248 B2
• Filed: 10/01/2007
• Issued: 10/19/2010
• Est. Priority Date: 10/30/2000
• Status: Active Grant

• Current Assignee: Chicago Mercantile Exchange, Inc. (CME Group Incorporated)
• Original Assignee: Chicago Mercantile Exchange, Inc. (CME Group Incorporated)
• Inventors: Thornburgh, Mark, Brady, Neal, Stone, Frank, Erwin, William R., Gilmore, John, Carey, Noah, Quattrocki, Michael
• Primary Examiner(s): Poinvil; Frantzy
• Application Number:
  US11/865,534
• Publication Number:
  US 20080027851A1
• Time in Patent Office: 1,114 Days
• Field of Search: 705 10- 44, 705/37
• US Class Current: 705/37
• CPC Class Codes: G06Q 40/04 Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis
• CPC Class Codes: G06Q 40/12 Accounting

Abstract

A computer network and method for electronically trading derivatives. The system includes networks and methods where a control or network managing station in the network acts as a facilitator for the market makers and subscribers to make a trade at an Exchange. In another embodiment the network managing station consummates the trade between a market maker and a subscriber by matching binding quotes and orders and clears the trade at an Exchange. The computer network for electronically trading derivative comprises: (a) network managing station; (b) one or more market maker stations; (c) one or more subscriber stations; (d) one or more Exchanges. The network managing station connects market makers and subscribers for making real time indicative quotes, issuing requests for quotes, obtaining binding quotes and wherein the market maker and subscriber are in communication with an Exchange for sending binding quotes and orders to the Exchange for clearing and confirming transactions.

Claims

1. A system for trading derivatives, the system comprising:

a network;

at least one network managing station coupled with the network and operative to facilitate communications between at least one subscriber station and at least one market maker station such that any of the at least one subscriber station may request a continuous indicative quote from any of the at least one market maker station, the at least one network managing station being further operative to facilitate communication between any of the at least one subscriber station and any of the at least one market maker station such that the subscriber station may request a binding quote therefrom;

wherein the at least one market maker station is coupled with the network and operative to receive a request for a continuous indicative quote via the network for at least one product transmitted by one of at least one subscriber station, determine an indicative quote associated with the at least one product and provide the one of the at least one subscriber station with the indicative quote for only the at least one product via the network, the at least one market maker station being further operative to subsequently provide a subsequent indicative quote for only the at least one product via the network to the one of the at least one subscriber station superceding a previously provided indicative quote, the at least one market maker station being further operative to receive a request for a binding quote via the network for the at least one product transmitted by the one of the at least one subscriber station, determine a binding quote associated with the at least one product and respond to the one of the at least one subscriber station with the binding quote for only the at least one product via the network; and

wherein the at least one subscriber station is coupled with the network and operative to transmit the request for an indicative quote for the at least one product to the at least one market maker station via the network, the at least one subscriber station being further operative to transmit the request for a binding quote for the at least one product to the one market maker station via the network.

2. The system of claim 1 wherein the subsequent indicative quote is different from the previously provided indicative quote.

3. The system of claim 1 wherein the at least one market maker station is further operative to provide the subsequent indicative quote upon the elapse of a period of time.

4. The system of claim 1 wherein the at least one market maker station is further operative to provide the subsequent indicative quote based on the occurrence of an event.

5. The system of claim 1 wherein the event comprises a change in the market for the at least one product.

6. The system of claim 1, wherein the identify of the market maker station and requesting subscriber are substantially anonymous.

7. The system of claim 6, wherein the at least one network managing station is further operative to transmit the request for an indicative quote to the market maker station on behalf of the requesting subscriber station.

8. The system of claim 6, wherein the at least one network managing station is further operative to transmit the request for a binding quote to the at least one market maker station on behalf of the requesting subscriber station.

9. The system of claim 6, wherein the at least one network managing station is further operative to transmit the indicative quote on behalf of the at least one market maker station to the requesting subscriber station.

10. The system of claim 6, wherein the at least one network managing station is further operative to transmit the binding quote on behalf of the at least one market maker station to the requesting subscriber station.

11. The system of claim 1, wherein:

the at least one subscriber station being further operative to receive at least one of the binding quote from the at least one market maker station and transmit an order based thereon via the network to an exchange for clearing and confirmation; and

wherein the system further comprises;

at least one exchange operative to receive the order via the network for clearing and confirmation.

12. The system of claim 11, wherein the at least one network managing station further comprises:

an audit database operative to store a record of the request for an indicative quote and the request for a binding quote generated by the at least one subscriber station, the indicative quote and the binding quote generated by the at least one market maker station and the order transmitted by the at least one subscriber station; and

wherein the at least one network managing station is further operative to monitor the network for requests for indicative quotes, requests for binding quotes, indicative quotes, binding quotes and orders and update the audit database based thereon.

13. The system of claim 1, wherein only a subset of the at least one market maker station receive the request for an indicative quote.

14. The system of claim 1, wherein a non-requesting subscriber stations of the at least one subscriber station does not receive the indicative quote.

15. The system of claim 1, wherein the network comprises a relational market wherein each of the at least one subscriber station is capable of communicating with each of the at least one market maker station to request and receive quotes.

16. A method for trading derivatives, the method comprising:

enabling communications by a computer between a requestor and a particular market maker station of a plurality of market maker stations to allow the requestor to request an indicative quote for at least one product of a plurality of products from the particular market maker station;

enabling communications by said computer between the requestor and at least the particular market maker station of the plurality of market maker stations to allow the requestor to request a binding quote for only the at least one product of the plurality of products from the at least particular market maker station; and

whereby the requestor may cause transmission of the request for an indicative quote for the at least one product via a computerized network system to the particular market maker station of the plurality of market maker stations, the remaining of the plurality of market maker stations not receiving the request for an indicative quote, and whereby the particular market maker station may respond to the request for indicative quote with an indicative quote for only the at least one product and subsequently provide a subsequent indicative quote superceding the previous indicative quote, and further the at least particular market maker station may respond to the request for a binding quote with a binding quote for only the at least one product.

17. The method of claim 16 wherein the subsequent indicative quote is different then the previous indicative quote.

18. The method of claim 16 wherein the particular market maker station provides the subsequent indicative quote upon the elapse of a period of time.

19. The method of claim 16 wherein the particular market maker station provides the subsequent indicative quote based on the occurrence of an event.

20. The method of claim 19 wherein the event comprises a change in the market for the at least one product.

21. The method of claim 16, further comprising indicating a plurality of products for which the market maker associated with the particular market maker station is interested in quoting.

22. The method of claim 16, wherein the identity of the particular market maker station and requestor are substantially anonymous.

23. The method of claim 16, further comprises polling a plurality of market makers stations, each associated with a different market maker possibly interested in quoting for the at least one product and evaluating the responses thereto.

24. The method of claim 16, further comprising:

storing a record of the request for indicative quote and the request for binding quote generated by the requestor in an audit database; and

monitoring the network for requests for indicative quotes, requests for binding quotes, indicative quotes and binding quotes, and updating the audit database based thereon.

25. A server for facilitating trading derivatives over a network, the server being coupled with a network and comprising:

means for enabling communications between a requestor and a particular market maker station of a plurality of market maker stations to allow the requestor to request an indicative quote for at least one product of a plurality of products from the particular market maker station;

means for enabling communications between the requestor and at least the particular market maker station of the plurality of market maker stations to allow the requestor to request a binding quote for only the at least one product of the plurality of products from the at least particular market maker station; and

whereby the requestor may cause transmission of the request for an indicative quote for the at least one product via the network to the particular market maker station of the plurality of market maker stations, a remaining of the plurality of market maker stations not receiving the request for an indicative quote, and whereby the particular market maker station may respond to the request for indicative quote with an indicative quote for only the at least one product and subsequently provide a subsequent indicative quote superceding the previous indicative quote, and further the at least particular market maker station may respond to the request for a binding quote with a binding quote for only the at least one product.