Controlling implied markets during a stop loss trigger

• US 8,112,347 B2
• Filed: 09/13/2007
• Issued: 02/07/2012
• Est. Priority Date: 07/25/2003
• Status: Active Grant

• Current Assignee: Chicago Mercantile Exchange, Inc. (CME Group Incorporated)
• Original Assignee: Chicago Mercantile Exchange, Inc. (CME Group Incorporated)
• Inventors: Farrell, James, Krause, James
• Primary Examiner(s): Lemieux, Jessica
• Application Number:
  US11/900,756
• Publication Number:
  US 20080010187A1
• Time in Patent Office: 1,608 Days
• Field of Search: 705 35- 38
• 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 mitigates the effects of a market spike caused by the triggering and the election of a conditional order in an automated matching system. Conditional orders submitted to a trading engine are evaluated to compare a price of an order to a predetermined price range. Matching of the orders may be delayed when the price of the orders lies outside of the predetermined price range. An opening price to be used by the trading engine is derived and a time interval is used to delay a matching of the orders until the opening price is within a predetermined price range up to a maximum delay time set by a control center. Implied spreads are also removed until other instruments within a trading unit are verified open.

Claims

1. A computer readable medium storing instructions which when executed mitigate the effects of a market spike caused by the triggering of conditional orders for products within a trading unit, the computer readable medium comprising:

an evaluation logic that monitors orders submitted to an automated trading engine in an automated matching system, the evaluation logic configured to compare an execution price of a conditional order to a predetermined price range;

a delay logic that delays a matching of the orders submitted to the automated trading engine when the execution price lies outside of the predetermined price range;

a pricing logic that derives an opening price to be used by the automated trading engine;

a timing logic that measures a time interval used to further delay a matching of the orders until the opening price is within a second predetermined price range; and

a verification logic that verifies that legs of an implied order are not in a reserved state, the verification logic configured to delay a matching of implied orders until all legs of the implied order are verified as not in the reserved state.

2. The system of claim 1 wherein the predetermined price range is based on a no-bust range.

3. The system of claim 1 wherein the predetermined price ranges comprise a varying price range and the time interval comprises a varying time interval, the varying price range and the varying time interval based on a time of day and a market volatility.

4. The system of claim 1 wherein the second predetermined price range comprises a multiple of a no-bust range.

5. The system of claim 1 wherein the opening price comprises an equilibrium price that falls substantially between the prices of the pending bids and the prices of the pending offers.

6. The system of claim 1 further comprising a matching system coupled to the evaluation logic, the matching system comprising one or more matching systems selected from the group comprising a first in, first out system, an allocation system, and a hybrid of a price and time priority.

7. The system of claim 1 wherein the time interval varies with a product.

8. The system of claim 1 wherein the legs of the implied order comprise orders for related products within the trading unit.

9. The system of claim 1 wherein the conditional order comprises a stop order.

10. The system of claim 1, wherein at least one of the implied orders is generated from an outright compound order.

11. The system of claim 1, wherein at least one of the implied orders is generated from a plurality of outright orders.

12. A method of mitigating the effect of a market spike caused by the triggering of conditional orders for products within a trading unit, comprising:

monitoring, using an order processor, orders submitted to an automated trading engine in an automated matching system;

comparing, using the order processor, an execution price of a conditional order to a predetermined price range;

delaying a matching of orders submitted to the automated trading engine when the execution price of the conditional order lies outside of the predetermined price range;

deriving an opening price to be used by the automated trading engine;

delaying a matching of the orders until the opening price lies within a second predetermined price range or a time period lapses;

verifying that legs of an implied order are not in a reserved state; and

delaying a matching of implied orders until all legs of the implied order are verified as not in the reserved state.

13. The method of claim 12 wherein the predetermined price range is based on a no-bust range and the second predetermined price range comprises a multiple of a no-bust range.

14. The method of claim 12 wherein the predetermined price range comprises a varying price range that changes with a time of day or a market volatility.

15. The method of claim 12 wherein the opening price comprises an equilibrium price that falls substantially between the prices of the pending bids and the prices of the pending offers.

16. The method of claim 12 wherein the opening price is derived to fall substantially within an overlap of pending bid and offer prices.

17. The method of claim 12 wherein the conditional order comprises a stop order.

18. The method of claim 12, wherein at least one of the implied orders is generated from an outright compound order.

19. The method of claim 12, wherein at least one of the implied orders is generated from a plurality of outright orders.