Regulating order entry in an electronic trading environment to maintain an actual cost for a trading strategy

• US 8,533,106 B2
• Filed: 03/02/2012
• Issued: 09/10/2013
• Est. Priority Date: 07/07/2006
• Status: Active Grant

• Current Assignee: Trading Technologies International, Inc.
• Original Assignee: Trading Technologies International, Inc.
• Inventors: McNicholas, Daniel T.
• Primary Examiner(s): Borlinghaus, Jason M
• Application Number:
  US13/411,438
• Publication Number:
  US 20120179595A1
• Time in Patent Office: 557 Days
• Field of Search: None
• 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

Techniques for regulating order entry based on an acceptable slop range for a trading strategy are described. According to one example embodiment, a trader may define an acceptable slop range for a trading strategy as a percentage. Using a spread trading algorithm, a spread price axis is generated and the trader may place an order for the trading strategy at a desired price, comprising placing an order in one leg market dependent on the market conditions of another leg market. Using the acceptable slop range, the system keep the net cost to the trader within the acceptable slop range, by regulating orders in the leg markets. Defining an acceptable slop range as a percentage allows the trader to monitor and regulate their profits and loss, regardless of the type of spread trading algorithm used or the placement of an order on the spread price axis.

Claims

1. A system including:

a computing device;

wherein the computing device is configured to receive a slop percentage value;

wherein the computing device is configured to receive a desired strategy price for a trading strategy, wherein the trading strategy includes a first leg for a first tradeable object and a second leg for a second tradeable object;

wherein the computing device is configured to determine an acceptable range of prices for the trading strategy based on the desired strategy price and the slop percentage value such that an actual cost of the trading strategy, when executed, is within a consistent tolerable difference from a desired cost of the trading strategy, regardless of the desired strategy price;

wherein the computing device is configured to generate an order message for an order to trade the first leg with a price based on the desired strategy price and a condition in the second leg;

wherein the computing device is configured to detect a change in the condition in the second leg; and

wherein the computing device is configured to determine whether the change in the condition in the second leg would cause the actual cost of the trading strategy, if executed, to fall outside of the acceptable range of prices and, if so, re-pricing the order to trade the first leg to maintain the desired strategy price, and, if not, refraining from re-pricing the order to trade the first leg.

2. The system of claim 1, wherein the slop percentage value is received from a user.

3. The system of claim 1, wherein the desired strategy price is received from a user.

4. The system of claim 1, wherein the trading strategy is a spread.

5. The system of claim 1, wherein the trading strategy is a divide spread.

6. The system of claim 1, wherein the acceptable range of prices includes a lowest acceptable price and a highest acceptable price.

7. The system of claim 6, wherein determining the acceptable range of prices includes:

determining the lowest acceptable price using the following relationship;

lowest acceptable price=desired strategy price*(100−

slop percentage value)/100; and

determining the highest acceptable price using the following relationship;

highest acceptable price=desired strategy price*(100+slop percentage value)/100.

8. The system of claim 6, wherein the slop percentage value includes a low slop percentage value and a high slop percentage value, wherein the low slop percentage value is different from the high slop percentage value.

9. The system of claim 8, wherein determining the acceptable range of prices includes:

determining the lowest acceptable price using the following relationship;

lowest acceptable price=desired strategy price*(100−

low slop percentage value)/100; and

determining the highest acceptable price using the following relationship;

highest acceptable price=desired strategy price*(100+high slop percentage value)/100.

10. The system of claim 1, wherein the price of the order to trade the first leg is determined based on the desired strategy price and the condition in the second leg according to a trading strategy definition.

11. The system of claim 1, wherein the condition is a current price at the inside market.

12. An apparatus including:

a first receiver configured to receive a slop percentage value;

a second receiver configured to receive a desired strategy price for a trading strategy, wherein the trading strategy includes a first leg for a first tradeable object and a second leg for a second tradeable object;

a first determiner configured to determine an acceptable range of prices for the trading strategy based on the desired strategy price and the slop percentage value such that an actual cost of the trading strategy, when executed, is within a consistent tolerable difference from a desired cost of the trading strategy, regardless of the desired strategy price;

a generator configured to generate an order message for an order to trade the first leg with a price based on the desired strategy price and a condition in the second leg;

a detector configured to detect a change in the condition in the second leg; and

a second determiner configured to determine whether the change in the condition in the second leg would cause the actual cost of the trading strategy, if executed, to fall outside of the acceptable range of prices and, if so, re-price the order to trade the first leg to maintain the desired strategy price, and, if not, refrain from re-pricing the order to trade the first leg.

13. The apparatus of claim 12, wherein the slop percentage value is received from a user.

14. The apparatus of claim 12, wherein the desired strategy price is received from a user.

15. The apparatus of claim 12, wherein the trading strategy is a spread.

16. The apparatus of claim 12, wherein the trading strategy is a divide spread.

17. The apparatus of claim 12, wherein the acceptable range of prices includes a lowest acceptable price and a highest acceptable price.

18. The apparatus of claim 17, wherein the instructions to determine the acceptable range of prices include instructions executable to:

determine the lowest acceptable price using the following relationship;

lowest acceptable price=desired strategy price*(100−

slop percentage value)/100; and

determine the highest acceptable price using the following relationship;

highest acceptable price=desired strategy price*(100+slop percentage value)/100.

19. The apparatus of claim 17, wherein the slop percentage value includes a low slop percentage value and a high slop percentage value, wherein the low slop percentage value is different from the high slop percentage value.

20. The apparatus of claim 19, wherein the instructions to determine the acceptable range of prices include instructions executable to:

determine the lowest acceptable price using the following relationship;

lowest acceptable price=desired strategy price*(100−

low slop percentage value)/100; and

determine the highest acceptable price using the following relationship;

highest acceptable price=desired strategy price*(100+high slop percentage value)/100.

21. The apparatus of claim 12, wherein the price of the order to trade the first leg is determined based on the desired strategy price and the condition in the second leg according to a trading strategy definition.

22. The apparatus of claim 12, wherein the condition is a current price at the inside market.