System and method for managing risk associated with product transactions

• US 8,655,768 B2
• Filed: 04/16/2012
• Issued: 02/18/2014
• Est. Priority Date: 05/15/2003
• Status: Active Grant

• Current Assignee: Cantor Index LLC
• Original Assignee: Cantor Index LLC
• Inventors: Burgis, Adam, Findlay, Lewis C.
• Primary Examiner(s): Bartley, Kenneth
• Application Number:
  US13/447,442
• Publication Number:
  US 20120203686A1
• Time in Patent Office: 673 Days
• Field of Search: 705/37, 463/25
• US Class Current: 705/37
• CPC Class Codes: G06Q 30/06 Buying, selling or leasing transactions
• CPC Class Codes: G06Q 40/04 Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange
• CPC Class Codes: G06Q 50/34 Betting or bookmaking, e.g. Internet betting
• CPC Class Codes: G06Q 99/00 Subject matter not provided for in other groups of this subclass
• CPC Class Codes: G07F 15/00 Coin-freed apparatus with meter-controlled dispensing of liquid, gas or electricity
• CPC Class Codes: G07F 17/3288 Betting, e.g. on live events, bookmaking

Abstract

A method of managing trading orders is provided. The method includes receiving a request to place a first order to trade a first product, the request being made using an account having one or more current balances. The method further includes determining a risk value for the first order based at least in part on the first product. The method further includes determining whether to approve the first order based at least in part on the risk value determined for the first order and one or more of the current balances for the account, and if the first order is approved, placing the first order.

Claims

1. A method, comprising:

receiving by at least one computing device from a user a request to place a first order to trade a first product, the request being made using an account that comprises one or more current balances, and wherein the first product comprises a first betting product;

determining by the at least one computing device a risk value for the first order based at least in part on the first product;

determining by the at least one computing device whether to approve the first order based at least in part on the risk value determined for the first order and one or more of the current balances for the account; and

if the first order is approved, placing by the at least one computing device the first order on an exchange;

receiving by the at least one computing device from the user a request to place a second order;

placing by the at least one computing device the second order on the exchange;

matching by the at least one computing device the first order with a third order to at least partially fill the first order; and

based at least in part on matching the first order with the third order, canceling by the at least one computing device the second order.

2. The method of claim 1, wherein the first product comprises one of a plurality of types of products and further comprising determining a risk factor for the first product based at least in part on the type of the first product.

3. The method of claim 1, wherein the risk value for the first order is determined based at least in part on an estimated maximum tick liability associated with the first product.

4. The method of claim 3, wherein the estimated maximum tick liability is determined based at least in part on statistical data regarding the first product.

5. The method of claim 1, further comprising determining a risk factor for the first product based at least in part on an estimated maximum tick liability associated with the first product.

6. The method of claim 1, further comprising determining a risk factor for the first product based at least in part on an actual maximum tick liability associated with the first product and an estimated maximum tick liability associated with the first product.

7. The method of claim 6, wherein determining the risk factor for the first product comprises selecting the lower of the actual maximum tick liability and the estimated maximum tick liability associated with the first product as the risk factor for the first product.

8. The method of claim 1, further comprising determining a risk factor for the first product based at least in part on statistical data regarding the first product.

9. The method of claim 1, further comprising determining a risk factor for the first product;

and

wherein;

the first order comprises a unit stake; and

determining the risk value for the first order comprises multiplying the risk factor for the first product by the unit stake.

10. The method of claim 1, further comprising:

as a result of matching the first order with the third order to at least partially fill the first order, adjusting one or more of the current balances associated with the account based at least in part on the risk value determined for the first order.

11. The method of claim 10, wherein the first product is associated with at least one event having an overall duration, the method further comprising:

updating the risk value for the matched first order during the overall duration of the at least one event; and

updating one or more of the current balances associated with the account based at least in part on the updated risk value for the matched first order.

12. The method of claim 11, further comprising:

assigning a so-far value to the product;

updating the so-far value during the overall duration of the at least one event associated with the first product; and

updating the risk value for the matched first order based at least in part on the updated so-far value assigned to the product.

13. The method of claim 1, further comprising:

as a result of matching the first order with the third order to at least partially fill the first order, adjusting one or more of the current balances associated with the account based at least in part on the risk value of the matched first order; and

canceling the unmatched second order based at least in part on adjusting one or more of the current balances.

14. The method of claim 1, further comprising:

receiving from the user a request to place a fourth order to trade a product, the fourth order at least partially defined by a stake;

determining a risk value for the fourth order;

placing the fourth order on the exchange;

as a result of matching the first order with the third order to at least partially fill the first order, adjusting one or more of the current balances associated with the account based at least in part on the risk value of the matched first order;

determining whether to reduce the stake of the unmatched fourth order based at least in part on the risk value of the unmatched fourth order and at least one of the adjusted current balances; and

reducing the stake of the unmatched fourth order by an amount based at least in part on at least one of the adjusted current balances.

15. The method of claim 1, further comprising:

in addition to the first and second orders, receiving a plurality of requests to place a plurality of orders, each request being made using the account, each of the plurality of orders being at least partially defined by a stake; and

for each of the plurality of orders;

determining a risk value for the order; and

placing the order on the exchange.

16. The method of claim 15, further comprising, for each of the plurality of orders, determining whether to approve the order based at least in part on the risk value determined for the order and one or more of the current balances for the account, and wherein placing each order comprises placing each approved order.

17. The method of claim 15, further comprising:

for each unmatched order of the plurality of orders;

determining whether to reduce the stake of the unmatched order based at least in part on the risk value of the unmatched order and at least one of the adjusted current balances; and

reducing the stake of the unmatched order by an amount based at least in part on at least one of the adjusted current balances.

18. A system, comprising:

at least one processor; and

a memory electronically coupled to the at least one processor, wherein the memory stores instructions which, when executed by the at least one processor, direct the at least one processor to;

receive from a user a request to place a first order to trade a first product, the request being made using an account, wherein the account comprises one or more current balances, and wherein the first product comprises a first betting product;

determine a risk value for the first order based at least in part on the first product;

determine whether to approve the first order based at least in part on the risk value determined for the first order and one or more of the current balances for the account; and

if the first order is approved, place the first order on an exchange;

receive from the user a request to place a second order;

place the second order on the exchange;

match the first order with a third order to at least partially fill the first order; and

based at least in part on matching the first order with the third order, cancel the second order.

19. The system of claim 18, wherein:

the first product comprises one of a plurality of types of products; and

the instructions, when executed by the at least one processor, further direct the at least one processor to determine a risk factor for the first product based at least in part on the type of the first product.

20. The system of claim 18, wherein the risk value for the first order is determined based at least in part on an estimated maximum tick liability associated with the first product.

21. The system of claim 20, wherein the estimated maximum tick liability is determined based at least in part on statistical data regarding the first product.

22. The system of claim 18, wherein the instructions, when executed by the at least one processor, further direct the at least one processor to determine a risk factor for the first product based at least in part on an estimated maximum tick liability associated with the first product.

23. The system of claim 18, wherein the instructions, when executed by the at least one processor, further direct the at least one processor to determine a risk factor for the first product based at least in part on an actual maximum tick liability associated with the first product and an estimated maximum tick liability associated with the first product.

24. The system of claim 23, wherein to determine the risk factor for the first product comprises to select the lower of the actual maximum tick liability and the estimated maximum tick liability associated with the first product as the risk factor for the first product.

25. The system of claim 18, wherein the instructions, when executed by the at least one processor, further direct the at least one processor to determine a risk factor for the first product based at least in part on statistical data regarding the first product.

26. The system of claim 18, wherein:

the first order comprises a unit stake;

the instructions, when executed by the at least one processor, further direct the at least one processor to determine a risk factor for the first product; and

to determine the risk value for the first order comprises to multiply the risk factor for the first product by the unit stake.

27. The system of claim 18, wherein the instructions, when executed by the at least one processor, further direct the at least one processor to:

as a result of matching the first order with the third order to at least partially fill the first order, adjust one or more of the current balances associated with the account based at least in part on the risk value determined for the first order.

28. The system of claim 27, wherein:

the first product is associated with one or more events having an overall duration;

the instructions, when executed by the at least one processor, further direct the at least one processor to;

update the risk value for the matched first order during the overall duration of the one or more events; and

update one or more of the current balances associated with the account based at least in part on the updated risk value for the first order.

29. The system of claim 28, wherein the instructions, when executed by the at least one processor, further direct the at least one processor to:

assign a so-far value to the product;

update the so-far value during the overall duration of the one or more events associated with the first product; and

update the risk value for the matched first order based at least in part on the updated so-far value assigned to the product.

30. The system of claim 18, wherein the instructions, when executed by the at least one processor, further direct the at least one processor to:

as a result of matching the first order with the third order to at least partially fill the first order, adjust one or more of the current balances associated with the account based at least in part on the risk value of the matched first order; and

cancel the unmatched second order based at least in part on adjusting one or more of the current balances.

31. The system of claim 18, wherein the instructions, when executed by the at least one processor, further direct the at least one processor to:

receive from the user a request to place a fourth order to trade a product, the fourth order at least partially defined by a stake;

determine a risk value for the fourth order;

place the fourth order on the exchange;

as a result of matching the first order with the third order to at least partially fill the first order, adjust one or more of the current balances associated with the account based at least in part on the risk value of the matched first order;

determine whether to reduce the stake of the unmatched fourth order based at least in part on the risk value of the unmatched fourth order and at least one of the adjusted current balances; and

reduce the stake of the unmatched fourth order by an amount based at least in part on at least one of the adjusted current balances.

32. The system of claim 18, wherein the instructions, when executed by the at least one processor, further direct the at least one processor to:

in addition to the first and second orders, receive a plurality of requests to place a plurality of orders, each request being made using the account, each of the plurality of orders at least partially defined by a stake;

determine a risk value for each of the plurality of orders; and

place each of the plurality of orders on the exchange.

33. The system of claim 32, wherein:

the instructions, when executed by the at least one processor, further direct the at least one processor to determine, for each order, whether to approve the order based at least in part on the risk value determined for the order and one or more of the current balances for the account; and

to place each order comprises to place each approved order.

34. The system of claim 32, wherein the instructions, when executed by the at least one processor, further direct the at least one processor to:

for each unmatched order of the plurality of orders;

determine whether to reduce the stake of the unmatched order based at least in part on the risk value of the unmatched order and at least one of the adjusted current balances; and

reduce the stake of the unmatched second order by an amount based at least in part on at least one of the adjusted current balances.