Method and apparatus for trading securities or other instruments

• US 7,844,538 B2
• Filed: 09/10/2007
• Issued: 11/30/2010
• Est. Priority Date: 03/11/1998
• Status: Expired due to Fees

• Current Assignee: Folio Financial Incorporated (Goldman Sachs Group Incorporated)
• Original Assignee: Folio (Fn). Inc.
• Inventors: Wallman, Steven M. H.
• Primary Examiner(s): KAZIMI, HANI M
• Application Number:
  US11/898,150
• Publication Number:
  US 20080005013A1
• Time in Patent Office: 1,177 Days
• Field of Search: 705 35- 37
• US Class Current: 705/37
• CPC Class Codes: G06Q 40/00 Finance; Insurance; Tax strategies; Processing of corporate or income taxes
• CPC Class Codes: G06Q 40/04 Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange

Abstract

A method and apparatus for trading securities trades on behalf of customers expressing orders in both share and dollar amounts. Where a brokerage receives orders from customers in both dollar and share amounts, the brokerage can combine the orders, e.g., by aggregating and netting, and executing the outstanding orders through a market maker. The number of shares to order through the market maker depends on the price at which the market maker can execute. By capturing the spread, the spread can be equitably distributed among buyers and sellers without regard for whether the order was received as a value-based order or a share-based order.

Claims

1. A computer implemented method for processing a plurality of trading orders for at least one instrument comprising:

receiving a value-based order to trade at least one instrument by a computer, said value-based order consisting of a specified currency amount of the at least one instrument desired to be traded at a price determined by a market in the at least one instrument;

receiving a share-based order to trade at least one instrument by the computer, said share-based order including a specified amount of shares of the at least one instrument desired to be traded at a price determined by the market in the at least one instrument;

combining with a computer the value-based order for the at least one instrument and the share-based order for said at least one instrument to form a single order for the at least one instrument, said single order being a share-based order including a specified amount of shares of the at least one instrument desired to be traded at a price determined by the market in the at least one instrument; and

submitting the single order to an electronic trading system for execution in a market for the at least one instrument.

2. A computer readable medium storing instructions that, when executed by a processor, cause the processor to:

receive a value-based order to trade at least one instrument by a computer, said value-based order consisting of a specified currency amount of the at least one instrument desired to be traded at a price determined by a market in the at least one instrument;

receive a share-based order to trade at least one instrument by the computer, said share-based order including a specified amount of shares of the at least one instrument desired to be traded at a price determined by the market in the at least one instrument;

combine using a processor the value-based order for the at least one instrument and the share-based order for said at least one instrument to form a single order for the at least one instrument, said single order being a share-based order; and

submit the single order to an electronic trading system for execution in a market for the at least one instrument.

3. A computer implemented method for processing a plurality of orders for at least one instrument comprising:

receiving with a computer a plurality of value-based orders for the at least one instrument from a first plurality of investors, each of said plurality of value-based orders consisting of a specified currency amount of the at least one instrument desired to be traded at a price determined by a market in the at least one instrument;

receiving with a computer a plurality of share-based orders for the at least one instrument from a second plurality of investors;

each of said plurality of share-based orders including a specified amount of shares of the at least one instrument desired to be traded at a price determined by the market in the at least one instrument;

combining with a computer the plurality of value-based orders for the at least one instrument and the plurality of share-based orders for said at least one instrument to form a single order for the at least one instrument, said single order being a share-based order including a specified amount of shares of the at least one instrument desired to be traded at a price determined by the market in the at least one instrument; and

submitting via a computer network the single order to an electronic trading system for execution in a market for the at least one instrument.

4. A computer implemented method for allocating price among a plurality of investors that include at least one buyer and at least one seller of a security, comprising:

receiving with a computer a plurality of trading orders from the plurality of investors, some of which plurality of trading orders are expressed as value-based orders, each of said value-based orders including a specified currency amount of the security desired to be traded in a market for the security and some of which plurality of trading orders are expressed as share-based orders, each of said share-based orders including a specified amount of shares of the security desired to be traded in the market for security; and

assigning with a computer a midpoint price between an ask price and a bid price to each trading order;

converting with a computer each of the value-based orders to a share-based order using the assigned midpoint price;

combining with a computer the converted value-based orders with the received share-based orders to form a single order in the security, said single order being a share based order; and

submitting with a computer the single order for execution over a computer network.

5. A computer implemented method for processing a plurality of trading orders for an instrument comprising:

receiving with a computer a plurality of currency-based trading orders, each of said currency-based trading orders including a specified currency amount of the instrument desired to be traded in a market for the instrument;

receiving with a computer a plurality of share-based trading orders, each of said share-based trading orders including a specified amount of shares of the instrument desired to be traded in a market for the instrument;

netting with a computer all currency-based trading orders in a similar currency to create a plurality of single-similar-currency-based trading orders;

converting with a computer the plurality of single-similar-currency-based trading orders into a plurality of standard-currency-based trading orders using a predetermined currency exchange rate;

netting with a computer the plurality of standard-currency-based trading orders to create a single standard-currency-based trading order;

converting with a computer the single standard-currency-based trading order to a share-based trading order using a predetermined price for the instrument in the standard currency; and

netting with a computer the converted single standard-currency-based trading order and the single share-based trading order to form a single trading order, said single order being a share-based order; and

submitting with a computer the single order for execution over a computer network.

6. A computer implemented method for processing a plurality of trading orders for an instrument comprising:

receiving with a computer a plurality of value-based trading orders, each specified in a particular amount of value of the instrument desired to be traded in a market for the instrument;

receiving with a computer a plurality of share-based trading orders, each specified in a particular amount of shares of the instrument desired to be traded in a market for the instrument;

netting with a computer all value-based trading orders in a similar value basis to create a plurality of single-similar-value-basis-value-based trading orders;

converting with a computer the plurality of single-similar-value-basis-value-based trading orders into a plurality of standard-currency-based trading orders using a predetermined exchange rate with regard to the value basis in the standard currency;

netting with a computer the plurality of standard-currency-based trading orders to create a single standard-currency-based trading order;

converting with a computer the single standard-currency-based trading order to a share-based trading order using a predetermined price for the instrument in the standard currency;

netting with a computer the converted single standard-currency-based trading order and the single share-based trading order to form a single trading order, said single order being a share-based order; and

submitting with a computer the single order for execution over a computer network.

7. A computer implemented method for trading a plurality of orders for at least one instrument comprising the steps of:

receiving with a computer a plurality of value-based orders for the at least one instrument, wherein the plurality of value-based orders are specified in a value basis different from that in which the instrument is otherwise priced, and each of the plurality of value-based orders are also specified in a particular amount of value of the at least one instrument desired to be traded in a market for the at least one instrument;

receiving with a computer a plurality of share-based orders for the at least one instrument from a second plurality of investors, each of the plurality of share-based orders specified in a particular amount of shares of the at least one instrument desired to be traded in a market for the at least one instrument;

combining with a computer the plurality of value-based orders and the plurality of share-based orders for said at least one instrument to form a single order for the at least one instrument, said single order being a share-based order including a specified amount of shares of the at least one instrument desired to be traded in a market for the at least one instrument;

submitting the single order with a computer over a computer network for execution in the market for the at least one instrument; and

executing with a computer at least one trade in the at least one instrument.