Market participant issue selection system and method

• US 8,209,255 B2
• Filed: 07/14/2010
• Issued: 06/26/2012
• Est. Priority Date: 04/07/2005
• Status: Active Grant

• Current Assignee: Cboe Exchange, Inc. (Cboe Global Markets, Inc.)
• Original Assignee: Chicago Board Options Exchange Incorporated (Cboe Global Markets, Inc.)
• Inventors: Hustad, Daniel R., Pfaffenbach, Larry, Smollen, John E.
• Primary Examiner(s): Wong, Eric T
• Application Number:
  US12/836,349
• Publication Number:
  US 20100287088A1
• Time in Patent Office: 713 Days
• Field of Search: 705/37
• 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 of allocating rights for quoting issues on a trading facility such as an exchange is described. The method may include providing market participants such as remote market makers with a listing of issues available for remote quote streaming where the available issues are ranked according to predetermined trading parameters. A market participant requests allocations of rights to certain issues and the request is filtered according to a value associated with the ranking of the selected issues. The system includes an issue selection database having a listing of issues available for trading where each issue is ranked based on a trading parameter. An issue selection communication module communicates with the issue selection database and is configured to list available issues and rankings. An issue allocation filter receives a market participant request and compares the selected issues in that request to one or more exchange-based rules.

Claims

1. An options class allocation system for determining which market participants for an exchange are authorized to disseminate quotes on a trading facility for a particular options class, the options class allocation system comprising:

a memory having an options class selection database, the options class selection database comprising a listing of a plurality of options classes available for trading on the trading facility, wherein each options class is associated with a ranking based on a trading parameter associated with the options class;

a communication module configured for communicating with a trade engine of the exchange; and

a processor in communication with the trade engine via the communication module and in communication with the memory, the processor configured to;

receive a request to obtain a right to submit quotes in a subset of the plurality of available options classes from a market participant having an ownership interest in the exchange, wherein the ownership interest of the market participant is less than an amount necessary to obtain a right to submit quotes in all available options classes;

automatically determine if a total value of trading rights associated with each of the available options classes in the subset of available options classes in the request is within a value of the ownership interest associated with the market participant, where each options class in the subset of the plurality of available options classes is assigned a trading rights value corresponding to the ranking in the options class selection database; and

automatically transmit an approval of the request when the request is within the value of the ownership interest associated with the market participant.

2. The options class allocation system of claim 1, wherein the processor is further configured to:

transmit to the market participant the listing of the plurality of options classes available for trading on the trading facility, and the ranking associated with each options class, in response to receiving an options class selection query from the market participant.

3. The options class allocation system of claim 1, wherein receiving the request from the market participant comprises receiving the request from a remote market maker.

4. The options class allocation system of claim 1, wherein the processor is further configured to determine whether a maximum number of market participants have been authorized to submit quotes for a particular options class in the subset of the plurality of options classes.

5. The options class allocation system of claim 4, wherein the processor is further configured to place the remote market maker on a waiting list for the particular options class if the maximum number of market participants is already authorized to submit quotes for the particular options class, and to automatically notify the remote market maker when the particular options class is available.

6. The options class allocation system of claim 1, wherein the processor is further configured to:

re-rank options classes in the options class selection database at predetermined intervals;

review a value of options classes in the subset of the plurality of options classes; and

notify the market participant if the total value of options classes in the subset exceeds the exchange ownership value associated with the market participant.

7. The options class allocation system of claim 1, wherein the exchange comprises an all-electronic exchange.

8. The options class allocation system of claim 1, wherein the trading parameter comprises national average daily volume.

9. The options class allocation system of claim 8, wherein the processor is further configured to generate the ranking for each options class by associating a first tier ranking with each of the plurality of available options classes having a national average trading volume greater than a predetermined threshold and assigning a different tier ranking to each of the plurality of available options classes having a national average trading volume less than the predetermined threshold.

10. The options class allocation system of claim 1, wherein the ownership interest in the exchange comprises at least one of a number of seats owned or leased on the exchange, or a number of shares of stock in the exchange.

11. The options class allocation system of claim 1, wherein automatically transmitting an approval comprises communicating an authorization message to a trading engine, the authorization message comprising information identifying the market participant and information identifying options classes in the subset of the plurality of options classes.