Automated order protection trading system

• US 7,860,796 B2
• Filed: 01/27/2006
• Issued: 12/28/2010
• Est. Priority Date: 01/27/2005
• Status: Active Grant

• Current Assignee: MarketAxess Holdings Inc.
• Original Assignee: MarketAxess Holdings Inc.
• Inventors: Levy, Robert D.
• Primary Examiner(s): Badii; Behrang
• Application Number:
  US11/341,309
• Publication Number:
  US 20060190386A1
• Time in Patent Office: 1,796 Days
• Field of Search: 705/37, 705/26, 705/35, 705/35.R, 705/38, 705/64
• US Class Current: 705/45
• CPC Class Codes: G06Q 20/042 characterized in that the payment protocol involves at least one cheque
• CPC Class Codes: G06Q 20/382 insuring higher security of transaction
• 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
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis

Abstract

Methods and systems for trading financial or commodity assets are presented. In particular, the invention relates to a trading system and method that operates with third party data and a Third Party Inside Market to promote fair and orderly transactions. In some embodiments, a client order or client bid/offer is protected by automated order protection (AOP), which may be a set of rules or specifications that can modify a client'"'"'s order. In certain embodiments, an average weighted price function is used to protect a client order that might be larger than the best bid/offer. In other embodiments, an autofill, a tie-breaking, and a wait-for-follow process can be used to promote trading opportunities for dealers and/or clients.

Claims

1. A computer implemented method of financial trading using a computer trading system involving a client using a client computer and at least one dealer using a dealer computer in electronic communication with the computer trading system, comprising at least one of the sequential, sequence independent, and non-sequential steps of:

electronically receiving a client order by a server of the computer trading system from the client computer;

electronically transmitting the client order by the server of the computer trading system to at least one dealer computer used by at least one exclusive dealer, the client order remaining active for a limited period of time in an exclusive phase for receipt of a dealer matching message from the at least one exclusive dealer, wherein the at least one exclusive dealer is specified by the client;

during the exclusive phase;

waiting for a tie-breaking interval to elapse;

selecting a dealer matching message by at least one of a price auction and a random selection, if more than one dealer matching message is received from the at least one exclusive dealer in the tie-breaking interval; and

executing the client order at the selected dealer matching message price;

upon expiration of the exclusive phase and the client order remaining open, transitioning into an open phase where the client order is electronically transmitted by the computer trading system to at least one dealer computer used by at least one permissioned dealer and the client order remains active for a limited period of time in the open phase for receipt of a dealer matching message from the at least one permissioned dealer, wherein the computer trading system identifies the at least one permissioned dealer based on a preexisting relationship between the at least one permissioned dealer and the client; and

upon expiration of the open period time and the client order remaining open, transitioning into a protected order phase where the computer trading system executes automatic order protection (AOP) rules to protect the client order and the client order is executed by the computer trading system responsive to the AOP rules.

2. The method of claim 1, further comprising:

receiving Third Party Inside Market (TPIM) data; and

comparing the TPIM data with the client order.

3. The method of claim 2, further comprising adjusting the client order based on the comparison of TPIM data.

4. The method of claim 1, wherein the protected order phase includes an average weighted price (AWP) function that calculates an average weighted price of at least one of bids and offers to determine if AOP rules are used to protect the client order at a level equal to the calculated AWP.

5. The method of claim 1, wherein the protected order phase includes an autofill function that fills the client order when the price difference between the client order and a dealer response is within a threshold.

6. The method of claim 1, wherein said step of transitioning into an open phase further comprises:

electronically transmitting by the computer trading system to at least one dealer computer used by at least one exclusive dealer for possible execution during said open period time.

7. The method of claim 1, further comprising:

determining expiration of the protected order phase responsive to one or more of;

filling the client order by one or more executions, partially filling the client order by one or more executions, the client order remaining unfilled for a specified time, the client order cancelled by client instruction, and the client order timed out under good-for-time instructions.

8. The method of claim 1, wherein execution of the AOP rules on the client order results in a more favorable price for the client.

9. The method of claim 1, wherein the preexisting relationship between the at least one permissioned dealer and the client includes a trading relationship.

10. A computerized method for financial trading, comprising:

receiving, by a computer trading system, a client order from a remote computing device associated with a client;

providing, by the computer trading system, the client order to at least one exclusive dealer specified by the client, the client order remaining active for a limited period of time in an exclusive phase for receipt of a dealer matching message from the at least one exclusive dealer;

during the exclusive phase;

waiting, by the computer trading system, for a tie-breaking interval to elapse;

selecting, by the computer trading system, a dealer matching message by at least one of a price auction and a random selection, if more than one dealer matching message is received from the at least one exclusive dealer in the tie-breaking interval; and

executing, by the computer trading system, the client order at the selected dealer matching message price;

identifying, by the computer trading system upon expiration of the exclusive phase and the client order remaining open, at least one permissioned dealer based on a preexisting relationship between the client and the at least one permissioned dealer;

providing, by the computer trading system, the client order to the at least one permissioned dealer, the client order remaining active for a limited period of time in an open phase for receipt of a dealer matching message from the at least one permissioned dealer;

executing, by the computer trading system upon expiration of the open phase and the client order remaining open, automatic order protection (AOP) rules to protect the client order; and

executing, by the computer trading system, the client order responsive to the AOP rules.

11. A computer program product for financial trading, tangibly embodied in a computer readable storage device, the computer program product including instructions operable to cause a data processing apparatus to:

receive a client order from a remote computing device associated with a client;

provide the client order to at least one exclusive dealer specified by the client, the client order remaining active for a limited period of time in an exclusive phase for receipt of a dealer matching message from the at least one exclusive dealer;

during the exclusive phase;

wait for a tie-breaking interval to elapse;

select a dealer matching message by at least one of a price auction and a random selection, if more than one dealer matching message is received from the at least one exclusive dealer in the tie-breaking interval; and

execute the client order at the selected dealer matching message price;

identify, upon expiration of the exclusive phase and the client order remaining open, at least one permissioned dealer based on a preexisting relationship between the client and the at least one permissioned dealer;

provide the client order to the at least one permissioned dealer, the client order remaining active for a limited period of time in an open phase for receipt of a dealer matching message from the at least one permissioned dealer;

execute, upon expiration of the open phase and the client order remaining open, automatic order protection (AOP) rules to protect the client order; and

execute the client order responsive to the AOP rules.