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

• US 9,805,418 B2
• Filed: 07/26/2013
• Issued: 10/31/2017
• 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:
  US13/951,529
• Publication Number:
  US 20140095370A1
• Time in Patent Office: 1,558 Days
• Field of Search: None
• 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

Regulating order entry based on an acceptable slop range for a trading strategy is 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 method including:

determining by a computing device an acceptable range of prices for a trading strategy based on a desired strategy price and a slop percentage value such that a difference between a desired cost of the trading strategy and an actual cost of the trading strategy, when executed, is within a defined tolerable difference, regardless of the desired strategy price, wherein the trading strategy includes a first leg for a first tradeable object and a second leg for a second tradeable object;

sending by the computing device to an electronic exchange 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 order is queued at the electronic exchange;

detecting by the computing device a change in the condition in the second leg; and

determining by the computing device 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, sending a message to the electronic exchange to re-price the order to trade the first leg to maintain the desired strategy price, and, if not, refraining from sending a message to re-price the order to trade the first leg to preserve the position of the order in the queue at the electronic exchange.

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

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

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

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

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

7. The method 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 method of claim 7, 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 method 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 method 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 method of claim 1, wherein the condition is a current price at the inside market.