System and method for block trading

• US 8,510,208 B2
• Filed: 04/07/2011
• Issued: 08/13/2013
• Est. Priority Date: 12/09/2002
• Status: Expired due to Fees

• Current Assignee: Deep Liquidity, Inc.
• Original Assignee: Sam Balabon
• Inventors: Balabon, Sam
• Primary Examiner(s): KANERVO, VIRPI H
• Application Number:
  US13/066,101
• Publication Number:
  US 20110288980A1
• Time in Patent Office: 859 Days
• Field of Search: None
• US Class Current: 705/37
• 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

A method and system for trading financial instruments which reduces the leakage of trading interest when buyers and sellers of financial instruments desire to trade. Accordingly, in one embodiment, a trading system allows traders to speculate on the hidden liquidity in the market by offering liquidity at fixed prices which are inferior to the NBBO (National Best Bid Offer) in exchange for rights to sweep the market for better priced quotes. In another embodiment of the invention, a liquidity provider can set their own fee. This fee is charged to the liquidity taker if their quote is executed. This fee compensates traders for the risk of taking a position in a financial instrument. In another embodiment of the invention, dummy orders are used to reduce trading interest leakage when limit orders are placed into order books. In another embodiment of the invention, a trading system will only match liquidity taking orders with single liquidity providing orders of equal or greater in size.

Claims

1. A computer-implemented method for facilitating trading financial instruments, comprising:

receiving by a computer an order to trade a financial instrument by a first party, the order specifying a price and a side of trade;

entering by the computer the order into a trading system;

generating by the computer a dummy order of the financial instrument specifying a price, a side of trade, and based in a direct relationship to the first party'"'"'s order in the trading system, wherein the side of trade is opposite to the side of trade of the first party;

displaying by the computer the first party'"'"'s order and the dummy order, wherein the computer does not identify either order as the dummy order;

receiving by the computer an order from the second party;

matching by the computer the second party'"'"'s order with the dummy order; and

notifying the second party that the second party'"'"'s order was matched with the dummy order.

2. The method of claim 1, wherein the financial instrument is one of a stock, a bond, a contract, an option, a future, a commodity and a currency.

3. The method of claim 1, and further generating by the computer multiple dummy orders.

4. The method of claim 1, wherein generating the dummy order is based on market data.

5. The method of claim 1, wherein generating the dummy order is based on characteristics of the first party'"'"'s order.

6. The method of claim 1, wherein generating the dummy order is based on other orders in in the trading system.