System and method for trading fixed income financial instruments

• US 7,925,566 B1
• Filed: 07/17/2000
• Issued: 04/12/2011
• Est. Priority Date: 07/17/2000
• Status: Expired due to Fees

• Current Assignee: UBS Business Solutions AG (UBS Ag)
• Original Assignee: UBS Financial Services Incorporated (UBS Ag)
• Inventors: Naratil, Thomas C.
• Primary Examiner(s): Colbert; Ella
• Assistant Examiner(s): GREENE, DANIEL LAWSON
• Application Number:
  US09/617,853
• Time in Patent Office: 3,921 Days
• Field of Search: 705/1, 705 35- 37, 707/100, 707/104.1
• 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

Abstract

A system for automated trading of U.S. Treasury, Liquid Agency, and Zero Coupon STRIP financial instruments comprises an updatable system database; an updatable offering inventory database which receives real time price and quantity information pertaining to each financial instrument from a market data feed; and a system proprietor operative to determine a national best bid and offer price and a derived price for each financial instrument in the offering inventory. The system proprietor applies a price improvement process to a trade in the event that an offsetting trade occurs, and updates the system database and offering inventory to reflect transactions executed by the system. Advantageously, the system provides users with a mechanism to provide the best price at the time of execution. Historical data is utilized to (i) price securities that are spread off a benchmark where an active quote for a particular security is unavailable, and (ii) retrieve prices for future analysis. The global fixed income market is thereby provided with a system that can sustain long term industry needs and readily adapt to a changing environment.

Claims

1. A server system for the automated trading of financial instruments, comprising:

an updatable database that receives real time price and quantity information pertaining to each of a plurality of financial instruments from a market data feed, the plurality of financial instruments constituting an offering inventory; and

a server that automatically;

receives a first order to execute a first trade of a selected financial instrument;

forwards the first order to a trading system to execute the first trade;

identifies an offsetting trade relative to the first trade of the selected financial instrument, wherein the offsetting trade is identified within a predefined period of time after execution of the first trade;

determines a price improvement value based on a first price for the first trade of the selected financial instrument and a second price for the offsetting trade of the selected financial instrument; and

applies the price improvement value to at least the first price for the first trade of the selected financial instrument, resulting in an adjusted first price.

2. The system of claim 1, wherein the server cancels or revises orders or trades.

3. The system of claim 1, wherein the server notifies a user that an order has been executed.

4. The system of claim 1, wherein the server presents an interface for providing a user with the capability to manually update the offering inventory.

5. The system of claim 1, wherein the server automatically updates the offering inventory.

6. The system of claim 1, the market data feed being provided by at least one Interdealer Broker.

7. The system of claim 6, the market data feed being reformatted to record-based data prior to entry into the system.

8. The system of claim 1, further comprising a filter for removing incorrect market data from the offering inventory.

9. The system of claim 1, wherein the server calculates a derived price for the selected financial instrument, the derived price being calculated by:

(a) determining a spread between a last transaction price and a desired transaction benchmark for the selected financial instrument;

(b) determining a current existing price of the desired transaction benchmark; and

(c) adding the spread to the current existing price of the transaction benchmark.

10. The system of claim 1, wherein the server generates a confirmation of the first trade after execution thereof.

11. The system of claim 1, wherein the server provides the user with the capability to manually enter interfirm or dealer to dealer trades for execution.

12. The system of claim 11, wherein the server automatically updates the offering inventory in accordance with the manual trade.

13. The system of claim 1, wherein the second price of the offsetting trade prior to application of the price improvement value is a national best bid and offer price.

14. The system of claim 13, wherein the server converts the national best bid and offer price to a derived price in the event the national best bid and offer price is not available.

16. The system of claim 1, wherein the server automatically applies the price improvement value to the second price for the offsetting trade of the selected financial instrument, resulting in an adjusted second price for the offsetting trade.

18. The system of claim 1 wherein the price improvement value is determined based on an average of the first price for the first trade of the selected financial instrument and the second price for the offsetting trade of the selected financial instrument.

20. The system of claim 1 wherein the price improvement value is determined to make the adjusted first price for the first trade of the selected financial instrument equal to the second price for the offsetting trade of the selected financial instrument.

22. The system of claim 1, wherein the predefined period of time is within 30 seconds.

15. A computer-implemented data processing method for the automated trading of financial instruments comprising;

receiving, in an updatable database, real time price and quantity information pertaining to each of a plurality of financial instruments from a market data feed;

receiving a first order to execute a first trade of a selected financial instrument;

forwarding the first order to a trading system to execute the first trade;

identifying an offsetting trade relative to the first trade of the selected financial instrument, wherein the offsetting trade is identified within a predefined period of time after execution of the first trade;

determining a price improvement value based on a first price for the first trade of the selected financial instrument and a second price for the offsetting trade of the selected financial instrument; and

applying the price improvement value to at least the first price for the first trade of the selected financial instrument, resulting in an adjusted first price.

17. The method of claim 15, further comprising:

automatically applying the price improvement value to the second price for the offsetting trade of the selected financial instrument, resulting in an adjusted second price for the offsetting trade.

19. The method of claim 15 further comprising:

determining price improvement value based on an average of the first price for the first trade of the selected financial instrument and the second price for the offsetting trade of the selected financial instrument.

21. The method of claim 15 further comprising:

determining the price improvement value to make the adjusted first price for the first trade of the selected financial instrument equal to the second price for the offsetting trade of the selected financial instrument.

23. The method of claim 15, wherein the predefined period of time is within 30 seconds.

24. A server for the automated trading of financial instruments, comprising:

a processor and memory programmed to automatically;

transmit a first order to a trading system for execution of a first trade of a selected financial instrument;

identify an offsetting trade relative to the first trade of the selected financial instrument, wherein the offsetting trade is identified within a predefined period of time after execution of the first trade;

determine a price improvement value based on a first price for the first trade of the selected financial instrument and a second price for the offsetting trade of the selected financial instrument; and

applies the price improvement value to at least one of the first price for the first trade and the second price for the offsetting trade.