Regulating order entry in an electronic trading environment to maintain an actual cost for a trading strategy

• US 7,996,300 B2
• Filed: 01/14/2010
• Issued: 08/09/2011
• Est. Priority Date: 07/07/2006
• Status: Expired due to Fees

• Current Assignee: Trading Technologies International, Inc.
• Original Assignee: Trading Technologies International, Inc.
• Inventors: McNicholas, Daniel T.
• Primary Examiner(s): Borlinghaus; Jason M
• Application Number:
  US12/687,857
• Publication Number:
  US 20100121757A1
• Time in Patent Office: 572 Days
• Field of Search: None
• 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 system and method for regulating order entry based on an acceptable slop range for a trading strategy are described. According to one example embodiment, a trader may define an acceptable slop range for a trading strategy as a percentage. The trader may also define a variable to associate with the trading strategy. Using a spread trading algorithm, a spread price axis is generated and the trader may place an order for the trading strategy at a desired price, comprising placing an order in one leg market dependent on the market conditions of another leg market. Using the acceptable slop range, the system keep the net cost to the trader within the acceptable slop range, by regulating orders in the leg markets. Defining an acceptable slop range as a percentage allows the trader to monitor and regulate their profits and loss, regardless of the type of spread trading algorithm used or the placement of an order on the spread price axis.

Claims

1. A system for regulating order entry based on an acceptable slop range in an electronic trading environment including:

a trading station adapted to receive a percentage value that determines an acceptable range of prices at which a trader is willing to accept to buy or sell a spread, wherein the spread comprises a first leg and a second leg, and wherein the percentage value provides that an actual cost of a particular spread, when executed, is within a consistent tolerable difference from a desired cost of the spread, regardless of a desired spread price, the trading station adapted to receive the desired price to buy or sell the spread, wherein the desired spread price is associated with the desired cost of the spread, the trading station adapted to place an order at a price in a first leg of the spread, wherein the order is based on a condition in the second leg, the trading station adapted to detect a change in the condition, the trading station adapted to determine if the change in the condition would cause the spread to be bought or sold at a price outside of the acceptable range of prices and if so re-pricing the order in the first leg to maintain the desired spread price, and the trading station adapted to determine if the change in the condition would not cause the spread to be bought or sold at a price outside of the acceptable range of prices and if not then refraining from re-pricing the order.

2. The system of claim 1, wherein the tolerable difference relates to a tolerable amount of change in the condition that can occur before the order is re-priced.

3. The system of claim 1, wherein the particular spread is a divide spread, wherein the divide spread comprises a spread definition which divides the prices from the first leg by the prices in the second leg.

4. The system of claim 1, wherein the desired spread price determines the price of the order in the first leg based on the condition in the second leg according to a spread definition.

5. The system of claim 1, wherein the desired cost of the spread represents the user'"'"'s desired cost to buy or sell the spread and is based on subtracting the order price of the second leg from the order price of the first leg at a time when executing the spread would result in achieving the desired spread price.

6. The system of claim 1, wherein the actual spread price represents a price for the spread if the spread was executed at a current time according to a spread definition.

7. The system of claim 1, wherein the actual cost of the spread represents a cost to buy or sell the spread assuming that the spread is executed at a current time and is based on subtracting the order price of the second leg from the order price of the first leg.

8. The system of claim 1, wherein the desired spread price and the actual spread price can be different depending on the condition in the second leg, and if so, then the desired cost of the spread is different from the actual cost of the spread.

9. The system of claim 1, wherein the acceptable range of prices comprises a lowest acceptable price and a highest acceptable price for which a trader is willing to buy or sell a spread.

10. The system of claim 1, wherein determining the acceptable range of prices to buy a spread comprises:

determining the lowest acceptable price using the following relationship;

lowest acceptable price=desired spread price*(100−

slop)/100; and

determining the highest acceptable price using the following relationship;

highest acceptable price=desired spread price*(100+slop)/100.

11. The system of claim 1, wherein determining the acceptable range of prices to sell a spread comprises:

determining the lowest acceptable price using the following relationship;

lowest acceptable price=desired spread price*(100−

slop)/100; and

determining the highest acceptable price using the following relationship;

highest acceptable price=desired spread price*(100+slop)/100.

12. The system of claim 1, wherein the slop are user-defined.

13. The system of claim 1, wherein the slop is a percentage value.

14. The system of claim 1, wherein the slop for the lowest acceptable price can be different from the highest acceptable price.

15. The system of claim 1, wherein the actual spread price, according to the spread definition, when executed, will fall within the acceptable range of prices.

16. The system of claim 1, wherein the condition is a current price at the inside market.

17. The system of claim 1, wherein if the order in the first leg fills, an offsetting order is sent to the second leg, such that the offsetting order is placed at a current inside market price.

18. The system of claim 1, wherein the current inside market price comprises a highest bid price and a lowest ask price currently available for the second leg.

19. The system of claim 1, wherein the spread is considered executed once the orders in the first and second legs are filled.