Routing of orders in equity options by means of a parameterized rules-based routing table

• US 8,392,320 B2
• Filed: 04/23/2012
• Issued: 03/05/2013
• 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, Haller, Thomas
• Primary Examiner(s): Borlinghaus, Jason M
• Assistant Examiner(s): Fu, Hao
• Application Number:
  US13/453,745
• Publication Number:
  US 20120209758A1
• Time in Patent Office: 316 Days
• Field of Search: 705 35- 45
• 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 the “smart” routing of orders in an electronic options environment is disclosed. The method of routing includes different rules and protocols for orders that are allowed to route using a traditional intermarket linkage than for orders that are allowed to route using an alternative private direct connection or third-party service provider. The system and method of routing has at its basis a configurable, rules-based routing table that allows orders to be routed using different protocols based on the account type of the incoming order.

Claims

1. An options market center which lists a plurality of options series and routes orders to away market centers, comprising:

an order book for each option series and a market maker quote book for each option series which are maintained by an order matching engine, intermarket linkages and direct connections to a plurality of away market centers, and at least one configurable routing table including a set of routing rules;

an away market best bid and offer book that is separate from the order book and the market maker quote book and is maintained by an away market quote engine;

an interface for receiving orders, an interface for receiving quotes and an interface for receiving a top-of-book best bid and offer disseminated quotation from a plurality of away market centers for each option series;

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

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

the interface for receiving a top-of-book best bid and offer disseminated quotation receives an away market quote from an away market center for a specified option series on the market center;

the away market quote engine analyzes the received quote to determine whether the away market quote has moved away from the price of an order on the opposite side of the order book that it previously touched;

wherein responsive to determining that the away market quote has moved away from the price of an order on the opposite side of the order book that it previously touched, the quote engine notifies the order matching engine; and

the order matching engine then evaluates dark orders on the order book to determine whether any of the dark orders can now be displayed;

evaluates whether queued market orders can now be routed; and

evaluates whether the disseminated best contra-side quotation is now eligible to receive additional routed orders.

2. The options market center of claim 1, wherein responsive to determining that the away market quote has not moved away from the price of an order on the opposite side of the order book that it previously touched, the quote engine does not notify the order matching engine.

3. A method for options order routing, comprising:

(a) listing by a computing system, on a market center, having at least one processor and at least one memory a plurality of options series, wherein the computing system has an order book for each option series, has direct connections to a plurality of away market centers, receives a top-of-book best bid and offer disseminated quotation from the plurality of away market centers for each option series, and has at least one configurable routing table including a set of routing rules that specify direct connection parameters for each away market;

(b) receiving by the computing system an incoming order;

(c) determining by the computing system whether the order can execute at the NBBO or better;

(d) responsive to determining that the order can execute at the NBBO or better;

(d)(i) retrieving by the computing system the best bid and offer disseminated quotation from each away market center;

(d)(ii) determining by the computing system whether a disseminated quotation of any away market center is superior to the orders resident on the market center;

(d)(iii) responsive to determining that the disseminated quotation of any away market center is not superior;

(d)(iii)(a) first matching by the computing system the incoming order with any resident trading interest at the NBBO or better and then evaluating by the computing system the remaining portion of the incoming order to determine whether the remaining portion of the incoming order is eligible to route to an away market center at the NBBO, now that the resident trading interest at the NBBO has been cleared;

(d)(iii)(b) responsive to determining that the remaining portion of the incoming order is eligible to route to the away market center, retrieving by the computing system the set of routing rules from the routing table for the away market center having the superior disseminated quotation;

(d)(iii)(c) determining by the computing system whether the remaining portion of the incoming order can be routed to the away market center having the superior disseminated quotation;

(d)(iii)(d) responsive to determining that the remaining portion of the incoming order can be routed to the away market center having the superior disseminated quotation, selecting by the computing system a direct connection protocol and generating an outbound order for the remainder of the incoming order based on the routing rules for the specified away market center; and

(d)(iii)(e) routing by the computing system the generated outbound order to the away market center having the superior disseminated quotation over the selected direct connection.