System and method for controlling markets during a stop loss trigger

• US 9,760,949 B2
• Filed: 08/22/2014
• Issued: 09/12/2017
• Est. Priority Date: 07/25/2003
• Status: Active Grant

• Current Assignee: Chicago Mercantile Exchange, Inc. (CME Group Incorporated)
• Original Assignee: Chicago Mercantile Exchange, Inc. (CME Group Incorporated)
• Inventors: Farrell, James, Krause, James, Chadid, Mazen
• Primary Examiner(s): Robinson, Kito R
• Application Number:
  US14/466,359
• Publication Number:
  US 20150046315A1
• Time in Patent Office: 1,117 Days
• Field of Search: 705 37, 705 36 R
• 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

A system mitigates the effects of a market spike caused by the triggering and the election of a conditional order in an automated matching system. The system includes evaluation logic, delay logic, pricing logic and timing logic. The evaluation logic monitors conditional orders submitted to a trading engine and is configured to compare a price of an order to a first predefined price range. The delay logic delays matching of the orders submitted to the trading engine when the price of the orders lie outside of the first predefined price range. The pricing logic derives an opening price to be used by the trading engine. The timing logic measures a time interval used to delay a matching of the orders until the opening price is within a predefined price range up to a maximum delay time set by a control center. A method of mitigating the effect of a market spike caused by the triggering and the election of a conditional order includes monitoring conditional orders submitted to the trading engine. The method compares the price of a conditional order to a first predefined price range and delays the matching of orders submitted to the trading engine when the price of the conditional order lies outside of the first predetermined price range. The method derives an opening price to be used by the trading engine; and measures a time interval used to delay the matching of the orders until the opening price is within a predefined price range up to a maximum delay time set by a control center.

Claims

1. A stop-loss computer system that mitigates the effects of a market spike caused by the triggering and the election of a stop order, the stop-loss computer system comprising:

a processor and memory coupled therewith;

an evaluation logic stored on the memory and executable by the processor that monitors stop orders submitted to a trading engine in an automated matching system in real time, the evaluation logic being configured to automatically compare an execution price of a stop order to a first predefined price range;

a delay logic stored on the memory and executable by the processor that delays the matching of the stop orders submitted to the trading engine when the price of a transaction lies outside of the first predefined price range;

a pricing logic stored on the memory and executable by the processor that derives an opening price to be used by the trading engine; and

a timing logic stored on the memory and executable by the processor that measures a time interval used to delay a matching of the stop orders until the opening price is within a second predefined price range.

2. The system of claim 1 wherein the first predefined price range is based on a no-bust range.

3. The system of claim 1 wherein the first predefined price range comprises a varying price range that changes with the time of day.

4. The system of claim 1 wherein the first predefined price range comprises a varying price range that changes with a market volatility.

5. The system of claim 1 wherein the first predefined price range comprises a varying price range and the time interval comprises a varying time interval, the varying price range and the varying time interval being based on a time of day and a market volatility.

6. The system of claim 1 wherein the second-predefined price range comprises a multiple of a no-bust range.

7. The system of claim 1 wherein the opening price comprises an equilibrium price that falls substantially between the prices of the pending bids and the prices of the pending offers.

8. The system of claim 1 wherein the opening price is derived to fall substantially within an overlap of pending bid and offer prices.

9. The system of claim 1 wherein the timing logic delays a matching of the orders until the opening price is within the second predefined price range or a period of time lapses.

10. The system of claim 1 wherein the timing logic delays a matching of the orders until the opening price is within the second predefined price range or a period of time lapses or a manual intervention occurs.

11. The system of claim 1 further comprising a matching system coupled to the evaluation logic.

12. The system of claim 11 wherein the matching system comprises one or more matching systems selected from the group comprising a first in, first out system, an allocation system, and a hybrid of a price and time priority.

13. The system of claim 1 further comprising a control center coupled to the evaluation logic.

14. The system of claim 1 further comprising a messaging system coupled to the evaluation logic.

15. The system of claim 1 further comprising a wireless messaging system coupled to the evaluation logic.

16. The system of claim 1 wherein the time interval varies with a time of day.

17. The system of claim 1 wherein the first predefined price range comprises a synthetic no bust range.

18. A computer implemented stop-loss method that mitigates the effects of a market spike caused by the triggering and the election of a stop order comprising:

monitoring, by a processor in real time, orders submitted to a trading engine in an automated matching system;

comparing, automatically by the processor, an execution price of a stop order to a first predefined price range;

delaying the matching of the orders submitted to the trading engine when the price of a transaction lies outside of the first predefined price range;

deriving, by the processor, an opening price to be used by the trading engine; and

measuring, by the processor, a time interval used to delay a matching of the orders until the opening price is within a second predefined price range.

19. The method of claim 18 wherein the opening price comprises an equilibrium price that falls substantially between the prices of the pending bids and the prices of the pending offers.

20. A stop-loss apparatus that mitigates the effects of a market spike caused by the triggering and the election of a stop order, the apparatus comprising:

a non-transitory computer readable medium operable to store data indicating orders submitted to a trading engine; and

a spike control processor coupled with the non-transitory computer readable medium, the spike control processor configured to monitor the orders submitted to the trading engine in real time and automatically compare an execution price of a stop order to a first predefined price range, delay the matching of the orders submitted to the trading engine when the price of a transaction lies outside of the first predefined price range, derive an equilibrium price that falls substantially between the prices of the pending bids and the prices of the pending offers submitted to the trading engine during a delay of the matching of orders, and measure a time interval used to delay a matching of the orders until the equilibrium price is within a second predefined price range.