System and method for improved order entry using market depth

• US 8,301,541 B1
• Filed: 05/02/2006
• Issued: 10/30/2012
• Est. Priority Date: 09/30/2004
• Status: Active Grant

• Current Assignee: Trading Technologies International, Inc.
• Original Assignee: Trading Technologies International, Inc.
• Inventors: Monroe, Fred, Burns, Michael J., Singer, Scott F.
• Primary Examiner(s): Kalinowski, Alexander
• Assistant Examiner(s): LOFTUS, ANN E
• Application Number:
  US11/415,887
• Time in Patent Office: 2,373 Days
• Field of Search: 705/37, 705/36.R
• 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
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis

Abstract

Market depth information pertaining to the hedging side is utilized to intelligently break a non-hedging order into multiple orders, such that the orders rest at cascading price levels. This way, the trader can benefit from sweeps in the book and still properly account for the market depth on the hedging side. Further, there is a greater probability of receiving “partials” on the spread order. In addition, hedge orders may be sent at multiple price levels, or sent to the market in pieces over time. By applying a more intelligent process to hedge orders (as opposed to “fire and forget”) an alternative beyond limit orders that can be leged or market orders is provided.

Claims

1. A computer based method for entering an order for a tradeable object being traded at an electronic exchange, the method comprising:

receiving a first market data for a first tradeable object at a computing device, the first market data comprising a first inside market that represents a highest bid price currently available for the first tradeable object and a lowest ask price currently available for the first tradeable object;

receiving a second market data for a second tradeable object at the computing device, the second market data comprising a second inside market that represents a highest bid price currently available for the second tradeable object and a lowest ask price currently available for the second tradeable object;

receiving a first order quantity to buy or sell the first tradeable object at the computing device;

determining an offset order quantity to buy or sell the second tradeable object via the computing device based on an established relationship between the first tradeable object and the second tradeable object;

in response to determining that an actual order quantity available at the second inside market is less than the offset order quantity;

generating a first order to buy or sell a new first order quantity of the first tradeable object at a first price via the computing device, where the new first order quantity is based on the actual order quantity available at the second inside market and the established relationship between the first tradeable object and the second tradeable object, and the first price is based on the second inside market and the established relationship between the first tradeable object and the second tradeable object, and

generating a second order to buy or sell a second order quantity of the first tradeable object at a second price via the computing device, where the second order quantity is based on an available order quantity for the second tradeable object at a price outside the second inside market and the established relationship between the first tradeable object and the second tradeable object, the available order quantity offsetting a remaining order quantity of the first tradeable object according to a difference between the first order quantity and the new first order quantity, and where the second price is based on the price outside the inside market and the established relationship between the first tradeable object and the second tradeable object;

sending the first order at the first price for the new first order quantity for the first tradeable object and the second order at the second price for the second order quantity for the first tradeable object to the electronic exchange via the computing device;

subsequent to the step of sending the first order to the electronic exchange, detecting a change in the actual order quantity available at the second inside market via the computing device; and

changing the new first order quantity of the first order pending at the electronic exchange via the computing device based on the change in the actual order quantity available at the second inside market when a change in the new first order quantity does not exceed a threshold value.

2. The method of claim 1, wherein the new first order quantity is a lesser portion of the first order quantity to buy or sell the first tradeable object.

3. The method of claim 2, further comprising:

defining a maximum number of orders to be placed to fill the first order quantity.

4. The method of claim 3, further comprising:

preventing generation of a third order to fill the first order quantity based on the maximum number of orders.

5. The method of claim 1, further comprising:

determining the price of the first order using the established relationship and a price level available for the second tradeable object.

6. The method of claim 1, further comprising:

offsetting the first order once it has been filled at the electronic exchange by sending an offsetting order at a price level for a certain quantity of the second tradeable object, wherein the certain quantity is determined in part based on the amount of the new first order quantity that has been filled.

7. The method of claim 1, further comprising:

refraining from sending the first order to the electronic exchange until a condition is satisfied.

8. The method of claim 7, wherein the condition is a preset time parameter.

9. The method of claim 7, wherein the condition is frequency of quoting.

10. The method of claim 1, further comprising:

determining that the actual order quantity available after the change is higher than the actual order quantity that was used to determine the new first order quantity; and

adding a quantity to the new first order quantity of the first order based on the higher actual order quantity available for the second tradeable object.

11. The method of claim 10, further comprising:

detecting a partial fill of the new first order quantity;

determining the change in the actual order quantity available at the second inside market upon detecting the partial fill; and

adding the quantity to the first order upon detecting the partial fill.

15. The method of claim 1, where the computing device comprises a distributed network of devices having a processor.

12. A computer readable medium having stored therein instructions, which when executed by a processor cause the processor to execute acts comprising:

receiving a first market data for a first tradeable object, the first market data comprising a first inside market that represents a highest bid price currently available for the first tradeable object and a lowest ask price currently available for the first tradeable object;

receiving a second market data for a second tradeable object, the second market data comprising a second inside market that represents a highest bid price currently available for the second tradeable object and a lowest ask price currently available for the second tradeable object;

receiving a first order quantity to buy or sell the first tradeable object;

determining an offset order quantity to buy or sell the second tradeable object based on an established relationship between the first tradeable object and the second tradeable object;

in response to determining that an actual order quantity available at the second inside market is less than the offset order quantity;

generating a first order to buy or sell a new first order quantity of the first tradeable object at a first price via the computing device, where the new first order quantity is based on the actual order quantity available at the second inside market and the established relationship between the first tradeable object and the second tradeable object, and the first price is based on the second inside market and the established relationship between the first tradeable object and the second tradeable object, and

generating a second order to buy or sell a second order quantity of the first tradeable object at a second price via the computing device, where the second order quantity is based on an available order quantity for the second tradeable object at a price outside the second inside market and the established relationship between the first tradeable object and the second tradeable object, the available order quantity offsetting a remaining order quantity of the first tradeable object according to a difference between the first order quantity and the new first order quantity, and where the second price is based on the price outside the inside market and the established relationship between the first tradeable object and the second tradeable object;

sending the first order at the first price for the new first order quantity for the first tradeable object and the second order at the second price for the second order quantity for the first tradeable object to the electronic exchange via the computing device;

subsequent to the step of sending the first order to the electronic exchange, detecting a change in the actual order quantity available at the second inside market via the computing device; and

changing the new first order quantity of the first order pending at the electronic exchange via the computing device based on the change in the actual order quantity available at the second inside market when a change in the new first order quantity does not exceed a threshold value.

13. The computer readable medium of claim 12, where the acts further comprise:

determining that the actual order quantity available after the change is higher than the actual order quantity that was used to determine the new first order quantity; and

adding a quantity to the new first order quantity of the first order based on the higher actual order quantity available for the second tradeable object.

14. The computer readable medium of claim 13, where the acts further comprise:

detecting a partial fill of the new first order quantity;

determining the change in the actual order quantity available at the second inside market upon detecting the partial fill; and

adding the quantity to the first order upon detecting the partial fill.

16. The computer readable medium of claim 12 where the computing device comprises a distributed network of devices having a processor.

17. The computer readable medium of claim 12, where the acts further comprise:

defining a maximum number of orders to be placed to fill the first order quantity.

18. The computer readable medium of claim 12, where the acts further comprise:

determining the price of the first order using the established relationship and a price level available for the second tradeable object.

19. The computer readable medium of claim 12, where the acts further comprise:

offsetting the first order once it has been filled at the electronic exchange by sending an offsetting order at a price level for a certain quantity of the second tradeable object, wherein the certain quantity is determined in part based on the amount of the new first order quantity that has been filled.