System and method for managing risk associated with product transactions

• US 8,160,953 B2
• Filed: 11/15/2010
• Issued: 04/17/2012
• Est. Priority Date: 05/15/2003
• Status: Active Grant

• Current Assignee: Cantor Index LLC
• Original Assignee: Cantor Index LLC
• Inventors: Burgis, Adam, Findlay, Lewis C.
• Primary Examiner(s): Patel, Jagdish
• Assistant Examiner(s): Bartley, Kenneth
• Application Number:
  US12/946,257
• Publication Number:
  US 20110066542A1
• Time in Patent Office: 519 Days
• Field of Search: 705/37, 463/25
• US Class Current: 705/37
• CPC Class Codes: G06Q 30/06 Buying, selling or leasing transactions
• CPC Class Codes: G06Q 40/04 Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange
• CPC Class Codes: G06Q 50/34 Betting or bookmaking, e.g. Internet betting
• CPC Class Codes: G06Q 99/00 Subject matter not provided for in other groups of this subclass
• CPC Class Codes: G07F 15/00 Coin-freed apparatus with meter-controlled dispensing of liquid, gas or electricity
• CPC Class Codes: G07F 17/3288 Betting, e.g. on live events, bookmaking

Abstract

A method of managing trading orders is provided. The method includes receiving a request to place a first order to trade a first product, the request being made using an account having one or more current balances. The method further includes determining a risk value for the first order based at least in part on the first product. The method further includes determining whether to approve the first order based at least in part on the risk value determined for the first order and one or more of the current balances for the account, and if the first order is approved, placing the first order.

Claims

1. A method of managing trading orders, comprising:

receiving by at least one computing device a request to place a first order to trade a first product, the request being made using an account that comprises one or more current balances;

determining by the at least one computing device a risk value for the first order based at least in part on the first product;

determining by the at least one computing device whether to approve the first order based at least in part on the risk value determined for the first order and one or more of the current balances for the account;

if the first order is approved, placing by the at least one computing device the first order;

receiving by the at least one computing device a request to place a second order to trade a second product, the second order at least partially defined by a stake;

placing by the at least one computing device the second order;

matching by the at least one computing device the first order with a third order to at least partially fill the first order;

adjusting by the at least one computing device one or more of the current balances associated with the account based at least in part on the risk value of the matched first order; and

reducing by the at least one computing device the stake of the unmatched second order by an amount based at least in part on at least one of the adjusted current balances.

2. The method of claim 1, wherein the first product comprises a first betting product.

3. The method of claim 1, wherein the first product comprises one of a plurality of types of products and further comprising determining a risk factor for the first product based at least in part on the type of the first product.

4. The method of claim 1, wherein the risk value for the first order is determined based at least in part on an estimated maximum tick liability associated with the first product.

5. The method of claim 4, wherein the estimated maximum tick liability is determined based at least in part on statistical data regarding the first product.

6. The method of claim 1, further comprising determining a risk factor for the first product based at least in part on an estimated maximum tick liability associated with the first product.

7. The method of claim 1, further comprising determining a risk factor for the first product based at least in part on an actual maximum tick liability associated with the first product and an estimated maximum tick liability associated with the first product.

8. The method of claim 7, wherein determining the risk factor for the first product comprises selecting the lower of the actual maximum tick liability and the estimated maximum tick liability associated with the first product as the risk factor for the first product.

9. The method of claim 1, further comprising determining a risk factor for the first product based at least in part on statistical data regarding the first product.

10. The method of claim 1, further comprising determining a risk factor for the first product;

and

wherein;

the first order comprises a unit stake; and

determining the risk value for the first order comprises multiplying the risk factor for the first product by the unit stake.

11. The method of claim 1, wherein the first product is associated with at least one event having an overall duration, the method further comprising:

updating the risk value for the matched first order during the overall duration of the at least one event; and

updating one or more of the current balances associated with the account based at least in part on the updated risk value for the matched first order.

12. The method of claim 11, further comprising:

assigning a so-far value to the product;

updating the so-far value during the overall duration of the at least one event associated with the first product; and

updating the risk value for the matched first order based at least in part on the updated so-far value assigned to the product.

13. The method of claim 1, further comprising:

determining a risk value for the second order; and

wherein reducing the stake of the unmatched second order comprises determining whether to reduce the stake of the unmatched second trading order based at least in part on the risk value of the unmatched second order and at least one of the adjusted current balances.

14. The method of claim 1, further comprising:

in addition to the first and second orders, receiving a plurality of requests to place a plurality of orders, each request being made using the account, each of the plurality of orders being at least partially defined by a stake; and

for each of the plurality of orders;

determining a risk value for the order; and

placing the order.

15. The method of claim 14, further comprising, for each of the plurality of orders, determining whether to approve the order based at least in part on the risk value determined for the order and one or more of the current balances for the account, and wherein placing each order comprises placing each approved order.

16. The method of claim 14, further comprising:

for each unmatched order of the plurality of orders;

determining whether to reduce the stake of the unmatched trading order based at least in part on the risk value of the unmatched order and at least one of the adjusted current balances; and

reducing the stake of the unmatched order by an amount based at least in part on at least one of the adjusted current balances.

17. A system for managing orders, comprising:

a memory operable to store an account; and

a processor operable to;

receive a request to place a first order to trade a first product, the request being made using the account, wherein the account comprises one or more current balances;

determine a risk value for the first order based at least in part on the first product;

determine whether to approve the first order based at least in part on the risk value determined for the first order and one or more of the current balances for the account;

if the first order is approved, place the first order;

receive a request to place a second order to trade a second product, the second order at least partially defined by a stake;

place the second order;

match the first order with a third order to at least partially fill the first order;

adjust one or more of the current balances associated with the account based at least in part on the risk value of the matched first order; and

reduce the stake of the unmatched second order by an amount based at least in part on at least one of the adjusted current balances.

18. The system of claim 17, wherein the first product comprises a first betting product.

19. The system of claim 17, wherein the first product comprises one of a plurality of types of products and the processor determines a risk factor for the first product based at least in part on the type of the first product.

20. The system of claim 17, wherein the processor determines the risk value for the first order based at least in part on an estimated maximum tick liability associated with the first product.

21. The system of claim 20, wherein the estimated maximum tick liability is determined based at least in part on statistical data regarding the first product.

22. The system of claim 17, wherein the processor determines a risk factor for the first product based at least in part on an estimated maximum tick liability associated with the first product.

23. The system of claim 17, wherein the processor determines a risk factor for the first product based at least in part on an actual maximum tick liability associated with the first product and an estimated maximum tick liability associated with the first product.

24. The system of claim 23, wherein determining the risk factor for the first product comprises selecting the lower of the actual maximum tick liability and the estimated maximum tick liability associated with the first product as the risk factor for the first product.

25. The system of claim 17, wherein the processor determines a risk factor for the first product based at least in part on statistical data regarding the first product.

26. The method of claim 17, wherein:

the first order comprises a unit stake;

the processor determines a risk factor for the first product; and

the processor determines the risk value for the first order at least by multiplying the risk factor for the first product by the unit stake.

27. The system of claim 17, wherein:

the first product is associated with one or more events having an overall duration;

the processor updates the risk value for the matched first order during the overall duration of the one or more events; and

the processor updates one or more of the current balances associated with the account based at least in part on the updated risk value for the first order.

28. The system of claim 27, wherein the processor is further operable to:

assign a so-far value to the product;

update the so-far value during the overall duration of the one or more events associated with the first product; and

update the risk value for the matched first order based at least in part on the updated so-far value assigned to the product.

29. The system of claim 17, wherein the processor is further operable to:

determine a risk value for the second order; and

wherein reducing the stake of the unmatched second order comprises determining whether to reduce the stake of the unmatched second order based at least in part on the risk value of the unmatched second order and at least one of the adjusted current balances.

30. The system of claim 17, wherein the processor is further operable to:

in addition to the first and second orders, receive a plurality of requests to place a plurality of orders, each request being made using the account, each of the plurality of orders at least partially defined by a stake;

determine a risk value for each of the plurality of orders; and

place each of the plurality of orders.

31. The system of claim 30, wherein:

the processor determines for each of the plurality of orders, whether to approve the order based at least in part on the risk value determined for the order and one or more of the current balances for the account; and

the processor places each approved order.

32. The system of claim 30, further comprising a processor operable to:

for each unmatched order of the plurality of orders;

determine whether to reduce the stake of the unmatched order based at least in part on the risk value of the unmatched order and at least one of the adjusted current balances; and

reduce the stake of the unmatched second order by an amount based at least in part on at least one of the adjusted current balances.