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

• US 8,156,037 B2
• Filed: 06/24/2011
• Issued: 04/10/2012
• 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:
  US13/168,524
• Publication Number:
  US 20110258105A1
• Time in Patent Office: 291 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 method including:

receiving by a computing device a slop percentage value;

receiving by the computing device a desired strategy price for a trading strategy, wherein the trading strategy includes a first leg for a first tradeable object and a second leg for a second tradeable object;

determining by the computing device an acceptable range of prices for the trading strategy based on the desired strategy price and the slop percentage value such that an actual cost of the trading strategy, when executed, is within a consistent tolerable difference from a desired cost of the trading strategy, regardless of the desired strategy price;

generating by the computing device an order message for an order to trade the first leg with a price based on the desired strategy price and a condition in the second leg;

detecting by the computing device a change in the condition in the second leg; and

determining by the computing device whether the change in the condition in the second leg would cause the actual cost of the trading strategy, if executed, to fall outside of the acceptable range of prices and, if so, re-pricing the order to trade the first leg to maintain the desired strategy price, and, if not, refraining from re-pricing the order to trade the first leg.

2. The method of claim 1, wherein the slop percentage value is received from a user.

3. The method of claim 1, wherein the desired strategy price is received from a user.

4. The method of claim 1, wherein the trading strategy is a spread.

5. The method of claim 1, wherein the trading strategy is a divide spread.

6. The method of claim 1, wherein the acceptable range of prices includes a lowest acceptable price and a highest acceptable price.

7. The method of claim 6, wherein determining the acceptable range of prices includes:

determining the lowest acceptable price using the following relationship;

lowest acceptable price=desired strategy price*(100−

slop percentage value)/100; and

determining the highest acceptable price using the following relationship;

highest acceptable price=desired strategy price*(100+slop percentage value)/100.

8. The method of claim 6, wherein the slop percentage value includes a low slop percentage value and a high slop percentage value, wherein the low slop percentage value is different from the high slop percentage value.

9. The method of claim 8, wherein determining the acceptable range of prices includes:

determining the lowest acceptable price using the following relationship;

lowest acceptable price=desired strategy price*(100−

low slop percentage value)/100; and

determining the highest acceptable price using the following relationship;

highest acceptable price=desired strategy price*(100+high slop percentage value)/100.

10. The method of claim 1, wherein the price of the order to trade the first leg is determined based on the desired strategy price and the condition in the second leg according to a trading strategy definition.

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

12. A non-transitory computer readable medium having stored therein instructions executable by a processor, wherein the instructions are executable to:

receive a slop percentage value;

receive a desired strategy price for a trading strategy, wherein the trading strategy includes a first leg for a first tradeable object and a second leg for a second tradeable object;

determine an acceptable range of prices for the trading strategy based on the desired strategy price and the slop percentage value such that an actual cost of the trading strategy, when executed, is within a consistent tolerable difference from a desired cost of the trading strategy, regardless of the desired strategy price;

generate an order message for an order to trade the first leg with a price based on the desired strategy price and a condition in the second leg;

detect a change in the condition in the second leg; and

determine whether the change in the condition in the second leg would cause the actual cost of the trading strategy, if executed, to fall outside of the acceptable range of prices and, if so, re-price the order to trade the first leg to maintain the desired strategy price, and, if not, refrain from re-pricing the order to trade the first leg.

13. The computer readable medium of claim 12, wherein the slop percentage value is received from a user.

14. The computer readable medium of claim 12, wherein the desired strategy price is received from a user.

15. The computer readable medium of claim 12, wherein the trading strategy is a spread.

16. The computer readable medium of claim 12, wherein the trading strategy is a divide spread.

17. The computer readable medium of claim 12, wherein the acceptable range of prices includes a lowest acceptable price and a highest acceptable price.

18. The computer readable medium of claim 17, wherein the instructions to determine the acceptable range of prices include instructions executable to:

determine the lowest acceptable price using the following relationship;

lowest acceptable price=desired strategy price*(100−

slop percentage value)/100; and

determine the highest acceptable price using the following relationship;

highest acceptable price=desired strategy price*(100+slop percentage value)/100.

19. The computer readable medium of claim 17, wherein the slop percentage value includes a low slop percentage value and a high slop percentage value, wherein the low slop percentage value is different from the high slop percentage value.

20. The computer readable medium of claim 19, wherein the instructions to determine the acceptable range of prices include instructions executable to:

determine the lowest acceptable price using the following relationship;

lowest acceptable price=desired strategy price*(100−

low slop percentage value)/100; and

determine the highest acceptable price using the following relationship;

highest acceptable price=desired strategy price*(100+high slop percentage value)/100.

21. The computer readable medium of claim 12, wherein the price of the order to trade the first leg is determined based on the desired strategy price and the condition in the second leg according to a trading strategy definition.

22. The computer readable medium of claim 12, wherein the condition is a current price at the inside market.