Hybrid trading system for concurrently trading securities or derivatives through both electronic and open-outcry trading mechanisms

• US 8,346,652 B2
• Filed: 09/16/2009
• Issued: 01/01/2013
• Est. Priority Date: 04/24/2003
• Status: Active Grant

• Current Assignee: Cboe Exchange, Inc. (Cboe Global Markets, Inc.)
• Original Assignee: Chicago Board Options Exchange Incorporated (Cboe Global Markets, Inc.)
• Inventors: Smith, Eileen C., Montesano, Anthony, Tilly, Edward T., Esposito, Mark A., Kipnes, Stuart J., Carone, Anthony J.
• Primary Examiner(s): Hammond, III, Thomas M
• Application Number:
  US12/560,981
• Publication Number:
  US 20100082473A1
• Time in Patent Office: 1,203 Days
• Field of Search: 705 35- 45
• 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 orders in an exchange configured for trading by a combination of electronic and open-outcry trading mechanisms is provided. One method includes permitting multiple quotes to be disseminated to the market, but limiting market making to only those entities having a physical presence on the floor of the exchange. Methods of enhancing the hybrid electronic and open-outcry exchange also include automatically eliminating crossed quotes and locked quotes while permitting certain orders to trade against locked quotes.

Claims

1. A method of trading derivatives in an exchange comprising:

in an electronic trade engine having a processor, the processor;

detecting a locked quote of a first market maker and a second market maker at the electronic trade engine;

delaying automatic execution of the locked quote for a predetermined time;

disseminating the locked quote to the exchange and permitting execution of orders against the locked quote; and

notifying the first and second market makers of the locked quote after a notification period, wherein the notification period is a period of time less than the predetermined time.

2. The method of claim 1, wherein permitting execution of orders against the locked quote comprises permitting only non-ICM orders to trade against the locked quote.

3. The method of claim 2, wherein the non-ICM orders comprise public customer orders.

4. The method of claim 1, wherein the first and second market makers comprise in-crowd market participants having a physical presence on a floor of the exchange.

5. The method of claim 1, further comprising detecting a crossed quote between the first and second market makers and widening a quote spread of one of the first and second market makers to lock with a quote of the other of the first and the second market makers.

6. The method of claim 1, wherein widening a quote of one of the first and second market makers comprises widening a later of two quotes to arrive at the electronic trade engine.