Dynamic price improvement

• US 8,380,614 B1
• Filed: 09/09/2011
• Issued: 02/19/2013
• Est. Priority Date: 04/16/2003
• Status: Active Grant

• Current Assignee: BGC Partners Incorporated (BGC Group, Inc.)
• Original Assignee: BGC Partners Incorporated (BGC Group, Inc.)
• Inventors: Sweeting, Michael, Johnson, Jim
• Primary Examiner(s): Havan, Thu Thao
• Application Number:
  US13/228,940
• Publication Number:
  US 20130041800A1
• Time in Patent Office: 529 Days
• Field of Search: 705 35- 40
• 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 is provided to enable traders to price improve on an item at an amount less than a predetermined pricing increment. Traders can improve on the price of the item using different price improvement levels (e.g., four different levels). Dynamic price improvement enables a dynamic order to maintain a predetermined position in a trading stack relative to other orders in the stack. The dynamic order may maintain its position in the trading stack by adjusting (e.g., increasing or decreasing) its price improvement level depending on market conditions. For example, a dynamic order may increases its price improvement level such that it stays at least one level ahead of the next best order in the trading stack. If the level cannot be further increased, the dynamic order may use its timestamp to maintain its position in the stack.

Claims

1. A method for operating an electronic trading system for the exchange of instruments, the method comprising the steps of:

in an electronic trading system designed to receive and store orders to buy and to sell instruments as submitted by parties, and to execute trades between matching buy and sell orders, stored buy and sell orders having order matching priority orderings relative to each other reflecting at least one attribute of the order in addition to price, the order matching priority ordering used by the electronic trading system to determine priority among orders for matching for execution;

receiving a dynamic price improvement order, being an order to buy or sell an identified instrument traded on the electronic trading system, whose order matching priority for execution against contraorders is maintained by the electronic trading system at least in part relative to earlier-submitted orders on the same side of the market by adjusting a price associated with the dynamic price improvement order;

receiving orders contra to the dynamic price improvement order, and matching the contra orders to the stored orders on the same side of the market as the dynamic price improvement order, the dynamic price improvement order being matched to the contra orders with the order matching priority relative to other orders as maintained by the electronic trading system.

2. The method of claim 1, in which at least some of the contra orders received for matching to the dynamic price improvement order are hits or lifts against the side of the market of the dynamic price improvement order.

3. The method of claim 1, in which the change includes an increase in the price of the dynamic price improvement order.

4. The method of claim 1, in which the change includes a decrease in the price of the dynamic price improvement order.

5. The method of claim 1, in which the order matching priority of the dynamic price improvement order is a position at a front of a trading stack.

6. The method of claim 1, further comprising the step of:

maintaining order matching priority of the dynamic price improvement order relative to other orders based on a timestamp assigned to the dynamic price improvement order.

7. The method of claim 6, further comprising maintaining the order matching priority based on the timestamp.

8. The method of claim 6, wherein in the event two or more the dynamic price improvement orders are received, the orders with older timestamps are matched prior to orders with newer timestamps.

9. The method of claim 1, wherein:

the electronic trading system reveals orders to users at a fixed price increment, and the price increment at which the price of the dynamic price improvement order is adjusted is a fraction of the revealed price increment.

10. The method of claim 1, wherein:

determining includes determining the price improvement level such that it is one level higher than the next best order in an order stack, wherein the price improvement level can be adjusted up to a maximum price improvement level.

11. The method of claim 1, further comprising the step of:

determining the price improvement level of a best order in an order stack; and

assigning a price improvement level to the dynamic price improvement order that improves the price of the dynamic price improvement order by one price improvement level when the price improvement level of the best order is not a maximum price improvement level.

12. The method of claim 11, further comprising the step of:

assigning the maximum price improvement level to the dynamic price improvement order when the price improvement level of the best order is at the maximum price improvement level.

13. The method of claim 1, wherein the dynamic price improvement order is the default order type for designated parties that use a trading interface to submit orders to the electronic trading system.

14. The method of claim 1, further comprising the step of:

providing to parties of the electronic trading system the option to select dynamic price improvement as one of several price improvement order types available for submission to the electronic trading system.

15. The method of claim 1 further comprising:

decreasing the price improvement level of at least one order on the same side of the market as the dynamic price improvement order such that the price improvement level of the at least one same-market-side order does not exceed the price improvement level assigned to the dynamic price improvement order.

16. The method of claim 15, wherein:

the price improvement level of the at least one second order is decreased to a price improvement level one level below a maximum price improvement level when the at least one price improved order is assigned a maximum price improvement level as its price improvement level.

17. A electronic trading system for the exchange of instruments, the system comprising at least one processor, the processor or processors of the system being configured to:

receive and store orders to buy and to sell instruments as submitted by parties, the stored buy and sell orders having order matching priority orderings relative to each other reflecting at least one attribute of the order in addition to price, the order matching priority used by the electronic trading system to determine order matching priority among orders for matching for execution;

receive a dynamic price improvement order, being an order to buy or sell an identified an instrument traded on the electronic trading system, whose order matching priority for execution against contraorders is maintained by the electronic trading system at least in part relative to earlier-submitted orders on the same side of the market by adjusting a price associated with the dynamic price improvement order; and

receive orders contra to the dynamic price improvement order, and match the contra order to the stored orders on the same side of the market as the dynamic price improvement order, the dynamic price improvement order being matched to the contra orders with the order matching priority relative to other orders as maintained by the electronic trading system.

18. The system of claim 17, in which the change includes an increase in the price of the dynamic price improvement order.

19. The system of claim 17, in which the change includes a decrease in the price of the dynamic price improvement order.

20. The system of claim 17, in which the order matching priority of the dynamic price improvement order is a position at a front of a trading stack.

21. The system of claim 17, wherein the processor is operative to maintain order matching priority of the dynamic price improvement order relative to other orders based on a timestamp assigned to the dynamic price improvement order.

22. The system of claim 21, wherein the processor is operative to maintain the order matching priority based on the timestamp.

23. The system of claim 17, wherein:

the electronic trading system reveals orders to users at a fixed price increment, and the price increment at which the price of the dynamic price improvement order is adjusted is a fraction of the revealed price increment.

24. The system of claim 17, wherein:

the processor is further operable to adjust the price of the dynamic price improvement order to one level more improved than the next best order in an order stack, wherein the price improvement level can be adjusted up to a maximum price improvement level.

25. The system of claim 17, wherein:

the processor is further operable to determine the price improvement level of a best order in an order stack; and

assign a price improvement level to the dynamic price improvement order that improves the price of the dynamic price improvement order by one price improvement level when the price improvement level of the best order is not a maximum price improvement level.

26. The system of claim 25, wherein the processor is operative to assign the maximum price improvement level to the dynamic price improvement order when the price improvement level of the best order is at the maximum price improvement level.

27. The system of claim 17, wherein the dynamic price improvement order is the default order type for designated parties that use a trading interface to submit orders to the electronic trading system.

28. The system of claim 17, wherein:

the processor is operative to decrease the price improvement level of at least one order on the same side of the market as the dynamic price improvement order such that the price improvement level of the at least one same-market-side order does not exceed the price improvement level assigned to the dynamic price improvement order.

29. The system of claim 28, wherein the price improvement level of the at least one second order is decreased to a price improvement level one level below a maximum price improvement level when the at least one price improved order is assigned a maximum price improvement level as its price improvement level.

30. The system of claim 17, wherein:

the electronic treading system is operable to providing to parties of the electronic trading system the option to select dynamic price improvement as one of several price improvement order types available for submission to the electronic trading system.