Closing in an electronic market

• US 20050283421A1
• Filed: 04/28/2004
• Published: 12/22/2005
• Est. Priority Date: 04/28/2004
• Status: Active Grant

• Current Assignee: Nasdaq, Inc.
• Original Assignee: Nasdaq OMX Group Incorporated (Nasdaq, Inc.)
• Inventors: Cox, Timothy E., Martyn, Peter J., Moore, Daniel F., Hatheway, Frank, Nunes, Adam Seth, Albers, Oliver, Franks, Dan Barnard
• Granted Patent: US 7,647,264 B2
• Time in Patent Office: Days
• US Class Current: 705/37
• CPC Class Codes: G06Q 40/04 Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange
• CPC Class Codes: G06Q 40/12 Accounting

Abstract

A method for trading a security in an electronic market includes receiving closing orders and orders for the security traded in the electronic market, disseminating an order imbalance indicator indicative of predicted trading characteristics of the security at the close of trading, determining a closing price for the security based on the closing orders and orders, and executing at least some of the closing orders at the determined closing price.

Claims

1. A method for trading a security in an electronic market, comprising:

receiving closing orders and orders for the security traded in the electronic market;

disseminating an order imbalance indicator indicative of predicted trading characteristics of the security at the close of trading;

determining a closing price for the security based on the closing orders and orders; and

executing at least some of the closing orders at the determined closing price.

2. The method of claim 1, wherein the closing orders comprise imbalance only orders.

3. The method of claim 2, further comprising:

modifying a limit price associated with one of the imbalance only orders based on a comparison between the limit price and an inside price.

4. The method of claim 1, wherein the closing orders comprise limit-on-close orders.

5. The method of claim 1 wherein the closing orders comprise market-on-close orders.

6. The method of claim 1, further comprising periodically producing the order imbalance indicator over a series of time periods.

7. The method of claim 6, wherein the order imbalance indicator at a first of the series of time periods comprises at least one of:

an inside match price;

a number of shares paired at an inside match price;

an on-close order imbalance;

a buy/sell direction of the on-close order imbalance;

an indicative clearing price range associated with the first of the series of times;

or

a percentage by which an indicative price varies from an inside price.

8. The method of claim 1, wherein determining the closing price comprises:

determining a preliminary closing price;

comparing the preliminary closing price to a benchmark value representing market conditions prior to the close of trading; and

determining the closing price based on the comparison.

9. An electronic market for trading of securities, comprising:

a client station for entering a closing order for a security traded in the electronic market;

a server system comprising;

a queue storing the closing order along with other orders;

a process to disseminate an order imbalance indicator indicative of predicted trading characteristics of the security at the close of trading; and

a process to determine a closing price for the security based on the stored orders and execute at least some of the orders at the determined closing price.

10. The method of claim 9, wherein the closing orders comprise imbalance only orders.

11. The method of claim 10, further comprising:

modifying a limit price associated with one of the imbalance only orders based on a comparison between the limit price and an inside price.

12. A computer program product residing on a computer-readable medium for use in an electronic market for trading of securities comprises instructions for causing a system to:

receive closing orders and orders for the security traded in the electronic market;

disseminate an order imbalance indicator indicative of predicted trading characteristics of the security at the close of trading;

determine a closing price for the security based on the closing orders and orders; and

execute at least some of the closing orders at the determined closing price.

13. The method of claim 12, wherein the closing orders comprise imbalance only orders.

14. The method of claim 13, further comprising:

modifying a limit price associated with one of the imbalance only orders based on a comparison between the limit price and an inside price.

15. A method for trading a security in an electronic market, comprising:

receiving closing orders and orders for the security traded in the electronic market;

determining a closing price for the security based on the closing orders and orders, the closing price being within a predetermined range of a benchmark value representing market conditions prior to the close of trading; and

executing at least some of the closing orders at the determined closing price.

16. The method of claim 15, wherein the benchmark value comprises a volume weighted average of orders executed during a predetermined time period before the close of trading.

17. A system comprising:

a server system configured to send an information data stream to a trading system, the data stream comprising at least one of;

an inside match price;

or

a near indicative clearing price.

18. The system of claim 17, wherein the inside match price is selected from an inside bid price, an inside offer price, an inside bid-offer midpoint price, or zero, based on an imbalance of closing orders.

19. The system of claim 17, wherein the near indicative clearing price comprises a price at which closing orders and continuous orders would execute if paired with each other.

20. The system of claim 17, wherein the server system resides in a venue for trading securities electronically.

21. The system of claim 20, wherein the venue is an electronic commerce network, an auction, an exchange, or an electronic exchange.

22. A system comprising:

a client station coupled to a server system that is part of an electronic venue for trading financial products, and configured to send an order for a security to the server system, the order comprising data fields including;

a price value;

a number of shares value; and

an indicator value that indicates the order as an imbalance only order.

23. The system of claim 22, wherein the imbalance only order executes in response to an imbalance in liquidity associated with the electronic venue.