Detection and mitigation of effects of high velocity price changes

• US 8,660,936 B1
• Filed: 10/02/2012
• Issued: 02/25/2014
• Est. Priority Date: 09/21/2012
• Status: Active Grant

• Current Assignee: Chicago Mercantile Exchange, Inc. (CME Group Incorporated)
• Original Assignee: Chicago Mercantile Exchange, Inc. (CME Group Incorporated)
• Inventors: Banke, Scott D., Liberman, Stanislav, Peck-Walden, Pearce, Scheerer, John, Kelly, Matthew J., Wolf, Brian M., Kane, Troy C., Lustyk, Neil A., Bailey, James, Ansari, Ashraf, Zheng, Haifeng
• Primary Examiner(s): Dass, Harish T
• Application Number:
  US13/633,703
• Time in Patent Office: 511 Days
• Field of Search: 705 35- 37, 705/28, 340/573, 706/50
• US Class Current: 705/37
• CPC Class Codes: G06Q 40/04 Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange

Abstract

The disclosed embodiments relate to mechanisms to rapidly detect and respond to situations where a market is not operating in a fair and balanced manner or otherwise where the market value is not reflective of a true consensus of the value of the traded products among the market participants. In particular, the disclosed embodiments continually scan for, rapidly detect and respond to extreme changes, either up (“spike”) or down (“dip”) in the market, such as a “flash crash,” where a precipitous market move occurs. Generally, the disclosed embodiments determine when a market for a particular product moves too quickly in too short of period of time, e.g. the velocity of the market exceeds a defined threshold limit.

Claims

1. A computer implemented method for mitigating an effect of a change in a market for a product traded on an exchange, the method comprising:

monitoring, by a processor, the market for the product;

identifying, by the processor, a comparison value of the product during each elapse of a duration of time and at least one comparative value of the product upon each elapse of the duration of time and determining each previously identified comparative value identified within a threshold time thereof;

determining, by the processor, a difference between the identified comparison value and each of the determined previously identified comparative values;

determining, by the processor, if any of the determined differences deviates from a threshold value; and

performing, by the processor, an action, when any of the determined differences deviates from the threshold value.

2. The computer implemented method of claim 1 wherein the value of the product comprises a bid price of the product, an ask price of the product, a last traded price of the product, a last traded quantity of the product, a volatility of the product, market attribute, or a combination thereof.

3. The computer implemented method of claim 2 wherein the identifying further comprises determining the comparison value of the product as a value of each order to trade the product received during the elapse of the duration of time.

4. The computer implemented method of claim 2 wherein the identifying further comprises determining the at least one comparative value of the product as a minimum value of the product over the duration of time, maximum value of the product over the duration of time, an average of the value of the product over the duration of time, or combinations thereof.

5. The computer implemented method of claim 1 wherein the duration of time is dynamic.

6. The computer implemented method of claim 1 wherein the threshold time comprises a multiple of the duration of time.

7. The computer implemented method of claim 1 wherein the identifying further comprises storing the identified at least one comparative value in a memory.

8. The computer implemented method of claim 1 wherein the action comprises placing the market for the product in a reserved state.

9. The computer implemented method of claim 1 wherein the action comprises sending an alert to an operator of the exchange, a trader of the product, or a combination thereof.

10. The computer implemented method of claim 1 wherein the action comprises enabling trading opportunities for the product in a different market.

11. The computer implemented method of claim 1 wherein the action comprises preventing trading of the product at a price outside of a price limit.

12. The computer implemented method of claim 1 further comprising:

receiving, by the processor, the duration of time, the threshold time and the threshold value.

13. A system for mitigating an effect of a change in a market for a product traded on an exchange, the system comprising:

first logic stored in a memory and executable by a processor to cause the processor to monitor the market for the product;

second logic stored in a memory and executable by a processor to cause the processor to identify a comparison value of the product during each elapse of a duration of time and at least one comparative value of the product upon each elapse of the duration of time and determining each previously identified comparative value identified within a threshold time thereof;

third logic stored in a memory and executable by a processor to cause the processor to determine a difference between the identified comparison value and each of the determined previously identified comparative values;

fourth logic stored in a memory and executable by a processor to cause the processor to determine if any of the determined differences deviate from a threshold value; and

fifth logic stored in a memory and executable by a processor to cause the processor to perform an action, when any of the determined differences deviate from the threshold value.

14. The system of claim 13 wherein the value of the product comprises a bid price of the product, an ask price of the product, a last traded price of the product, a last traded quantity of the product, a volatility of the product, market attribute, or a combination thereof.

15. The system of claim 14 wherein the second logic is further executable by the processor to cause the processor to determine the comparison value of the product as a value of each order to trade the product received during the elapse of the duration of time.

16. The system of claim 14 wherein the second logic is further executable by the processor to cause the processor to determine the at least one comparative value of the product as a minimum value of the product over the duration of time, maximum value of the product over the duration of time, an average of the value of the product over the duration of time, or combinations thereof.

17. The system of claim 13 wherein the duration of time is dynamic.

18. The system of claim 13 wherein the threshold time is a multiple of the duration of time.

19. The system of claim 13 wherein the second logic is further executable by the processor to cause the processor to store the identified value in a memory.

20. The system of claim 13 wherein the action comprises placement of the market for the product in a reserved state.

21. The system of claim 13 wherein the action comprises transmission of an alert to an operator of the exchange, a trader of the product, or a combination thereof.

22. The system of claim 13 wherein the action comprises enablement of trading opportunities for the product in a different market.

23. The system of claim 13 wherein the action comprises prevention of trading of the product at a price outside of a price limit.

24. The system of claim 13 further comprising:

sixth logic stored in the memory and executable by the processor to cause the processor to receive the duration of time, the threshold time and the threshold value.

25. A system for mitigating an effect of a change in a market for a product traded on an exchange, the system comprising:

means for monitoring the market for the product;

means for identifying a comparison value of the product during each elapse of a duration of time and at least one comparative value of the product upon each elapse of the duration of time and determining each previously identified comparative value identified within a threshold time thereof;

means for determining a difference between the identified comparison value and each of the determined previously identified comparative values;

means for determining if any of the determined differences deviate from a threshold value; and

means for performing an action, when any of the determined differences deviate from the threshold value.