Directed order

• US 9,846,909 B2
• Filed: 11/20/2014
• Issued: 12/19/2017
• Est. Priority Date: 09/23/2005
• Status: Active Grant

• Current Assignee: NYSE Group, Inc. (Intercontinental Exchange, Inc.)
• Original Assignee: NYSE Group, Inc. (Intercontinental Exchange, Inc.)
• Inventors: Cormack, Michael A., Drake, Jennifer L., Haller, Thomas F., Hill, Robert A.
• Primary Examiner(s): Kazimi, Hani M
• Application Number:
  US14/549,244
• Publication Number:
  US 20150081515A1
• Time in Patent Office: 1,125 Days
• Field of Search: 705 37
• CPC Class Codes: G06Q 30/08 Auctions
• 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 directed order process and related market center are disclosed, wherein a market center grants permission to order sending firms to send directed order flow to participating designated market makers. Such designated market makers create a virtual guarantee order book for each permissioned order sending firm. If an order sending firm sends a directed order to the market center that is marketable against a virtual guarantee order, then the market center automatically pairs the orders in a two-sided directed cross order instruction, which executes against any superior trading interest in the marketplace first before crossing.

Claims

1. A method for crossing a directed order, comprising:

providing a posting market center having an internal book and having a guarantee order book, wherein the guarantee order book is specified for a designated market maker to populate the guarantee order book with guarantee orders for a specific order sending firm that is permissioned to send directed orders to the designated market maker,

said posting market center comprising a computer system having memory and at least one processor executing one or more routines that generate and present said internal book and guarantee order book;

automatically executing non-directed order trades via a continuous order matching process;

receiving a plurality of guarantee orders on the posting market center from the designated market maker intended for a specific order sending firm;

validating the received guarantee orders;

populating the guarantee order book with the validated guarantee orders;

receiving a directed order on the posting market center from the order sending firm directed to a specific designated market maker;

activating a Check Permissions for Incoming Directed Order (CPIDO) routine upon receipt of the directed order, the CPIDO routine comprising computer-readable instructions stored on a non-transitory computer readable storage medium and executed by at least one processor, said computer-readable instructions, when executed, causing the activated CPIDO routine to perform functions including;

identifying the order sending firm;

requesting and retrieving designated market maker order sending firm (DMM/OSF) table data; and

comparing the identity of the order sending firm against the table data to verify permission;

where the order sending firm does not have permission to send directed orders to the specified market maker, automatically converting the directed order to a non-directed order for matching through the continuous order matching process;

where the order sending firm is permissioned to send directed orders to the specified market maker, retrieving the guarantee order book and retrieving the best contra side guarantee order from the plurality of guarantee orders on the guarantee order book;

determining the marketability, including determining routing restrictions, of the directed order in relation to the retrieved best guarantee order;

for marketable directed orders, setting the price at which a directed cross is to execute;

determining the maximum size of a potential directed cross;

generating a match instruction for the directed order that pairs the directed order with the retrieved guarantee order and includes parameters for the determined directed cross price and the determined maximum size of the potential directed cross;

ranking the retrieved guarantee order in the internal book;

presenting the received directed order to the internal book;

retrieving the best contra side interest from the internal book; and

determining if the retrieved best contra side interest is the guarantee order paired with the directed order in the match instruction,

wherein if the retrieved best contra side interest is the paired guarantee order, matching the received directed order with the paired guarantee order at the determined directed cross price and at the determined maximum size, and

wherein the directed cross occurs automatically thereby eliminating human intervention and preventing negotiation in order matching.

2. The method of claim 1, wherein the received directed order is a buy order and the retrieved contra side guarantee order is a sell order.

3. The method of claim 1, wherein the received directed order is a sell order and the retrieved contra side guarantee order is a buy order.

4. The method of claim 1, wherein the posting market center interacts with a plurality of designated market makers and order sending firms;

wherein the posting maker center has a plurality of guarantee orders books and wherein each designated market maker creates a specific guarantee order book for each order sending firm that is permissioned to send such designated market maker a directed order.

5. The method of claim 1, wherein the posting market center further includes a table storing the DMM/OSF table data, said table data listing which order sending firms are permissioned to send directed orders to which designated market makers.

6. The method of claim 5, wherein the permissions table includes a designation which specifies a default designated market maker for a specific order sending firm.

7. The method of claim 1, wherein validating the received guarantee orders includes determining if the received guarantee order crosses the guarantee order book.

8. The method of claim 1, wherein validating the received guarantee orders includes determining if the received guarantee order has the same price as a guarantee order already on the guarantee order book.

9. The method of claim 1, wherein at least one of the received guarantee orders on the guarantee order book is a pegged order.

10. The method of claim 9, wherein the price of the pegged order is updated when the NBBO changes.

11. The method of claim 9, wherein the pegged order includes a discretionary offset.

12. The method of claim 9, wherein the pegged order includes a peg offset.

13. The method of claim 12, wherein the pegged order includes a peg limit.

14. The method of claim 1, wherein the parameter for the determined directed cross price is adjusted to prevent a trade through violation.

15. The method of claim 1, wherein if the retrieved best contra side interest is a regular book order, matching the received directed order with the retrieved contra side book order up to the size of the retrieved contra side book order and continuing to match the received directed order with contra side interest in the internal book until the directed order is fully traded or the directed order matches with the paired guarantee order.

16. The method of claim 1, wherein if the retrieved best contra side interest is a protected away market quote, determining whether the received directed order can be routed and where the received directed order can be routed, routing commitments on behalf of the directed order to the away market center up to the size of the away market quote;

and

continuing to match the received directed order with contra side interest in the internal book until the directed order is fully traded or the directed order matches with the paired guarantee order.

17. The method of claim 1, wherein if, after matching the received directed order, a portion of the guarantee order remains, returning the unmatched portion of the guarantee order to the guarantee order book.

18. A posting market center, comprising:

a computer system having memory and a processor executing one or more routines that generate and present an internal book and a guarantee order book, wherein the guarantee order book is specified for a designated market maker to populate the guarantee order book with guarantee orders for a specific order sending firm that is permissioned to send directed orders to the designated market maker;

an interface for receiving orders, including guarantee orders and directed orders;

the posting market center memory for storing code for analyzing and matching guarantee orders and directed orders; and

the processor for interacting with the interface and executing the code for analyzing and matching guarantee orders and directed orders, wherein the code, when executed;

automatically executes non-directed order trades via a continuous order matching process;

receives a plurality of guarantee orders from the designated market maker intended for a specific order sending firm;

validates the received guarantee orders;

populates the guarantee order book with the validated guarantee orders;

receives a directed order from the order sending firm directed to a specific designated market maker;

automatically activates a Check Permissions for Incoming Directed Order (CPIDO) routine upon receipt of the directed order, the CPIDO routine, when executed, causing the activated CPIDO routine to perform functions including;

identifying the order sending firm;

requesting and retrieving designated market maker order sending firm (DMM/OSF) table data; and

comparing the identity of the order sending firm against the table data to verify permission;

where the order sending firm does not have permission to send directed orders to the specified market maker, automatically converts the directed order to a non-directed order for matching through the continuous order matching process;

where the order sending firm is permissioned to send directed orders to the specified market maker, retrieves the guarantee order book and retrieves the best contra side guarantee order from the plurality of guarantee orders on the guarantee order book;

determines the marketability, including determining routing restrictions, of the directed order in relation to the retrieved best guarantee order;

for marketable directed orders, sets the price at which a directed cross is to execute;

determines the maximum size of a potential directed cross;

generates a match instruction for the directed order that pairs the directed order with the retrieved guarantee order and includes parameters for the determined directed cross price and the determined maximum size of the potential directed cross;

ranks the retrieved guarantee order in the internal book;

presents the received directed order to the internal book;

retrieves the best contra side interest from the internal book; and

determines if the retrieved best contra side interest is the guarantee order paired with the directed order in the match instruction,

wherein if the retrieved best contra side interest is the paired guarantee order, matches the received directed order with the paired guarantee order at the determined directed cross price and at the determined maximum size, and

wherein the directed cross occurs automatically thereby eliminating human intervention and preventing negotiation in order matching.