Diverse options order types in an electronic guaranteed entitlement environment

• US 8,311,930 B2
• Filed: 05/23/2011
• Issued: 11/13/2012
• Est. Priority Date: 07/28/2006
• Status: Active Grant

• Current Assignee: NYSE Group, Inc. (Intercontinental Exchange, Inc.)
• Original Assignee: NYSE Group, Inc. (Intercontinental Exchange, Inc.)
• Inventors: Adcock, Paul, Cormack, Michael, Famstrom, Amy, Hill, Robert
• Primary Examiner(s): Maguire, Lindsay M
• Assistant Examiner(s): Fu, Hao
• Application Number:
  US13/068,881
• Publication Number:
  US 20110231298A1
• Time in Patent Office: 540 Days
• Field of Search: 705 35- 37
• US Class Current: 705/37
• CPC Class Codes: G06Q 30/06 Buying, selling or leasing transactions
• 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

An enhanced system and method for handling, matching and executing a diverse group of limit-priced orders in an electronic options environment is disclosed. Most of the order types disclosed are automatically repriced and reposted as the NBBO changes to increase their execution opportunities. Market maker entitlements are integrated with the order processing, so that the market maker is guaranteed an allocation of the trade if the market maker is at the NBBO when an order priced at or better than the NBBO is received. Once posted to the order book, the displayed price of an order may be eligible for preferential execution in a market maker entitlement process, regardless of whether the displayed price is original or has been automatically repriced.

Claims

1. A method for trading automatically repriceable orders in an electronic options trading environment with market maker participation, comprising:

(a) listing by a computing system having at least one processor and at least one memory a plurality of options series on a market center, wherein the market center has an order book for each option series and a quote book for each option series, and wherein a plurality of the option series have an appointed lead market maker;

(b) receiving by the computing system an automatically repriceable order, retrieving by the computing system the side of the NBBO opposite the automatically repriceable order, and determining by the computing system whether the automatically repriceable order price is equal to or overlaps with the retrieved side of the NBBO;

(c) responsive to determining that the automatically repriceable order price is equal to or overlaps with the retrieved side of the NBBO, determining by the computing system whether the automatically repriceable order is for an option series that has a lead market maker, and determining by the computing system whether the lead market maker has a quote at the NBBO;

(d) responsive to determining that the automatically repriceable order is for an option series that has a lead market maker and the lead market maker has a quote at the NBBO, computing by the computing system an allocation percentage for the lead market maker and matching by the computing system the automatically repriceable order up to the lesser of the total size of the automatically repriceable order or the computed allocation percentage amount for the lead market maker.

2. The automatically repriceable order trading method of claim 1, wherein the automatically repriceable order is an exchange-restricted order.

3. The automatically repriceable order trading method of claim 1, wherein the automatically repriceable order is a reprice-and-ship inside limit order.

4. The automatically repriceable order trading method of claim 1, wherein the automatically repriceable order is a stand-your-ground inside limit order.

5. The automatically repriceable order trading method of claim 1, wherein the automatically repriceable order is a sweep limit order.

6. The automatically repriceable order trading method of claim 1, wherein the automatically repriceable order is an intermarket sweep limit order.

7. The automatically repriceable order trading method of claim 1, further comprising determining by the computing system whether the automatically repriceable order is too executable.

8. The automatically repriceable order trading method of claim 1, further comprising, prior to computing the lead market maker allocation percentage:

determining by the computing system whether the order book has at least one customer order at the NBBO;

responsive to determining that the order book has at least one customer order at the NBBO, determining by the computing system whether the at least one customer order is displayed and was posted to the order book prior to the lead market maker quote at the NBBO;

responsive to determining that the at least one customer order at the NBBO is displayed and was posted to the order book prior to the lead market maker quote at the NBBO, matching by the computing system the automatically repriceable order with the at least one customer order.

9. The automatically repriceable order trading method of claim 8, responsive to determining that the at least one customer order at the NBBO was posted to the order book after the lead market maker quote at the NBBO, computing by the computing system the lead market maker allocation percentage.

10. The automatically repriceable order trading method of claim 8, responsive to determining that the at least one customer order at the NBBO is not displayed, computing by the computing system the lead market maker allocation percentage.

11. The automatically repriceable order trading method of claim 1, wherein the lead market maker has a quote at the NBBO.

12. The automatically repriceable order trading method of claim 1, further comprising:

providing by the computing system at least one appointed market maker in the option series in addition to the lead market maker;

wherein the automatically repriceable order is from a specified order sending firm and is directed to and designates the at least one appointed market maker;

determining by the computing system whether the order sending firm is permitted to direct orders to the designated market maker;

responsive to determining that the order sending firm is permitted to direct orders to the designated market maker, determining by the computing system whether the designated market maker has a quote at the NBBO;

responsive to determining that the designated market maker has a quote at the NBBO, computing by the computing system an allocation percentage for the designated market maker;

matching by the computing system the automatically repriceable order up to the lesser of the total size of the automatically repriceable order or the computed allocation percentage amount for the designated market maker.

13. The automatically repriceable order trading method of claim 12, further comprising, prior to computing the designated market maker allocation percentage:

determining by the computing system whether the order book has at least one customer order at the NBBO;

responsive to determining that the order book has at least one customer order at the NBBO, determining by the computing system whether the at least one customer order is displayed and was posted to the order book prior to the designated market maker quote at the NBBO;

responsive to determining that the at least one customer order is displayed and was posted to the order book prior to the designated market maker quote at the NBBO, matching by the computing system the automatically repriceable order with the at least one customer order.

14. The automatically repriceable order trading method of claim 13, responsive to determining that the at least one customer order was posted to the order book after the designated market maker quote at the NBBO, computing by the computing system the designated market maker allocation percentage.

15. The automatically repriceable order trading method of claim 13, responsive to determining that the at least one customer order at the NBBO is not displayed, computing by the computing system the designated market maker allocation percentage.

16. The automatically repriceable order trading method of claim 1, wherein the market center includes a display order process and a working order process, wherein after the automatically repriceable order is matched with the lead market maker quote, processing by the computing system the automatically repriceable order in the display order process and the working order process.

17. The automatically repriceable order trading method of claim 16, wherein the automatically repriceable order is an exchange-restricted order, wherein the exchange-restricted order has quantity remaining after executing in the display order process and the working order process, and the method further comprising:

determining by the computing system whether the remaining portion of the exchange-restricted order locks or crosses the opposite side of the NBBO;

responsive to determining that the remaining portion of the exchange-restricted order locks or crosses the opposite side of the NBBO, automatically adjusting by the computing system the exchange-restricted order to at least one minimum price increment inferior to the opposite side of the NBBO.

18. The automatically repriceable order trading method of claim 17, wherein the NBBO changes, and the computing system keeps the automatically repriced exchange-restricted order price from repricing.

19. The automatically repriceable order trading method of claim 16, wherein the automatically repriceable order is a reprice-and-ship inside limit order, wherein the reprice-and-ship inside limit order has quantity remaining after executing in the display order process and the working order process, and the method further comprising:

determining by the computing system whether the display price of the remaining portion of the reprice-and-ship order is superior to the opposite side of the NBBO;

responsive to determining that the display price of the remaining portion of the reprice-and-ship order is superior to the opposite side of the NBBO, automatically adjusting by the computing system the reprice-and-ship inside limit order price to equal the opposite side of the NBBO.

20. The automatically repriceable order trading method of claim 16, wherein the automatically repriceable order is a stand-your-ground inside limit order, wherein the stand-your-ground inside limit order has quantity remaining after executing in the display order process and the working order process, and the method further comprising:

determining by the computing system whether the display price of the remaining portion of the stand-your-ground inside limit order is superior to the opposite side of the NBBO;

responsive to determining that the display price of the remaining portion of the stand-your-ground order is superior to the opposite side of the NBBO, automatically adjusting by the computing system the stand-your-ground inside limit order price to equal the opposite side of the NBBO.

21. The automatically repriceable order trading method of claim 16, wherein the automatically repriceable order is a sweep limit order, wherein the sweep limit order has quantity remaining after executing in the display order process and the working order process, and the method further comprising:

determining by the computing system whether the display price of the remaining portion of the sweep limit order is superior to the opposite side of the NBBO;

responsive to determining that the display price of the remaining portion of the sweep limit order is superior to the opposite side of the NBBO, automatically adjusting by the computing system the sweep limit order price to equal the opposite side of the NBBO.

22. The automatically repriceable order trading method of claim 16, wherein a cap is in place on how aggressive an intermarket sweep limit order can be in relation to the NBBO, wherein the automatically repriceable order is a sweep limit order, wherein the intermarket sweep limit order has quantity remaining after executing in the display order process and the working order process, and the method further comprising:

determining by the computing system whether the display price of the remaining portion of the intermarket sweep limit order is superior to the opposite side of the NBBO by more than the cap allows;

responsive to determining that the display price of the remaining portion of the intermarket sweep limit order is superior to the opposite side of the NBBO by more than the cap allows, automatically adjusting by the computing system the intermarket sweep limit order price to equal the most aggressive price allowed by the cap.

23. The automatically repriceable order trading method of claim 16, wherein the automatically repriceable order is an exchange-restricted order, wherein the exchange-restricted order has quantity remaining after executing in the display order process and the working order process, and the method further comprising:

determining by the computing system whether the remaining portion of the exchange-restricted order locks or crosses the opposite side of the NBBO;

responsive to determining that the remaining portion of the automatically exchange-restricted order locks or crosses the opposite side of the NBBO, canceling by the computing system the remaining portion of the exchange-restricted order.

24. A market center which lists a plurality of options series and handles automatically repriceable order trading, comprising:

(a) an order book for each option series and a quote book for each option series, wherein the order book has a displayed interest component and a nondisplayed interest component;

wherein a plurality of the option series have an appointed lead market maker;

(b) an interface for receiving orders and an interface for receiving quotes;

(c) a market center memory for storing code for analyzing and processing orders and quotes;

(d) a processor for interacting with the interfaces and executing the code for analyzing and processing quotes and orders, wherein the code, when executed;

(d)(i) receives an automatically repriceable order having a display order price;

(d)(ii) retrieves the side of the NBBO opposite the automatically repriceable order;

(d)(iii) determines whether the automatically repriceable order price is equal to or overlaps with the retrieved side of the NBBO;

(d)(iv) responsive to determining that the automatically repriceable order price is equal to or overlaps with the retrieved side of the NBBO;

(d)(iv)(A) determines whether the automatically repriceable order is for an option series that has a lead market maker;

(d)(iv)(B) determines whether the lead market maker has a quote at the NBBO;

(d)(iv)(C) responsive to determining that the automatically repriceable order is for an option series that has a lead market maker and the lead market maker has a quote at the NBBO;

(d)(iv)(C)(I) computes an allocation percentage for the lead market maker; and

(d)(iv)(C)(II) matches the automatically repriceable order up to the lesser of the total size of the automatically repriceable order or the computed allocation percentage amount for the lead market maker.

25. The market center of claim 24, wherein the automatically repriceable order is an exchange-restricted order.

26. The market center of claim 24, wherein the automatically repriceable order is a reprice-and-ship inside limit order.

27. The market center of claim 24, wherein the automatically repriceable order is a stand your ground inside limit order.

28. The market center of claim 24, wherein the automatically repriceable order is a sweep limit order.

29. The market center of claim 24, wherein the automatically repriceable order is an intermarket sweep limit order.

30. The market center of claim 24, wherein after the executed code matches the automatically repriceable order up to the lesser of the total size of the automatically repriceable order or the computed allocation percentage amount for the lead market maker, the executed code:

determines whether the automatically repriceable order display price would lock or cross the NBBO if posted;

responsive to determining that the automatically repriceable order display price is too aggressive in relation to the NBBO, adjusting the automatically repriceable order to a less aggressive price in relation to the NBBO.

31. The market center of claim 30, wherein the automatically repriceable order is an exchange-restricted order and its display price is superior or equal to the opposite side of the NBBO, and the executed code automatically adjusts the exchange-restricted order display price to at least one minimum price increment inferior to the opposite side of the NBBO before posting the order in the order book.

32. The market center of claim 30, wherein the automatically repriceable order is a reprice-and-ship inside limit order and its display price is superior to the opposite side of the NBBO, and the executed code automatically adjusts the reprice-and-ship inside limit order display price to equal the opposite side of the NBBO before posting the order in the order book.

33. The market center of claim 30, wherein the automatically repriceable order is a stand-your-ground inside limit order and its display price is superior to the opposite side of the NBBO, and the executed code automatically adjusts the stand-your-ground inside limit order display price to equal the opposite side of the NBBO before posting the order in the order book.

34. The market center of claim 30, wherein the automatically repriceable order is a sweep limit order and its display price is superior to the opposite side of the NBBO, and the executed code automatically adjusts the sweep limit order display price to equal the opposite side of the NBBO before posting the order in the order book.

35. The market center of claim 30, wherein the automatically repriceable order is an intermarket sweep limit order and its display price is superior to the opposite side of the NBBO and wherein a cap is in place on how aggressive an intermarket sweep limit order can be in relation to the NBBO, and the executed code:

determines whether the display price of the intermarket sweep limit order is superior to the opposite side of the NBBO by more than the cap allows; and

responsive to determining that the display price of the intermarket sweep limit order is superior to the opposite side of the NBBO by more than the cap allows, automatically adjusts the intermarket sweep limit order display price to equal the most aggressive price allowed by the cap before posting the order in the order book.