INSTINET COMMUNICATION SYSTEM FOR EFFECTUATING THE SALE OR EXCHANGE OF FUNGIBLE PROPERTIES BETWEEN SUBSCRIBERS

• US 3,573,747 A
• Filed: 02/24/1969
• Issued: 04/06/1971
• Est. Priority Date: 02/24/1969
• Status: Expired due to Term

• Current Assignee: Charles W. Adams, Herbert R. Behrens, Jerome M. Pustilnik, John T. Gilmore Jr
• Original Assignee: Charles W. Adams, Herbert R. Behrens, Jerome M. Pustilnik, John T. Gilmore Jr
• Inventors: Adams, Charles W., Behrens, Herbert R., Pustilnik, Jerome M., Gilmore, John T. Jr.
• Application Number:
  US04/801,455
• Time in Patent Office: 771 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: H04L 12/1804 for stock exchange and similar applications

Abstract

This disclosure is directed to an apparatus and method of automatically, anonymously and equitably buying and selling fungible properties between subscribers. The specific embodiment described in the disclosure relates to the buying and selling of securities wherein a communication system pursuant to this invention is described which permits institutional investors to communicate anonymously with each other for the purpose of arranging block trades of listed and over-the-counter securities. Said system comprises a centralized data storage unit, a digital computer, a plurality of subscriber terminals and a plurality of communication links established therebetween. The method of the system comprises the steps of (1) booking unfilled buy offers including associated price and quantity parameters on a buy offer list in a priority sequence according to a first predetermined program, (2) booking unfilled sell offers including associated price and quantity parameters on a sell offer list in a priority sequence according to a second predetermined program, (3) comparing in said priority sequence, the price and quantity parameters of each incoming offer with the corresponding parameters of each offer on the complementary one of said lists, (4) transacting said received offer with the higher priority offers on said complementary list if said incoming offer can be matched against one or more offers on the complementary offer list, and (5) placing the untransacted portion of said received offer on the corresponding one of said lists in a priority sequence according to the corresponding one of said predetermined programs if said incoming offer cannot be completely matched against offers on complementary offer list.

Claims

1. The method of automatically, anonymously and equitably buying and selling fungible properties between subscribers using an electronic computer having storage portions, comparator circuitry and other electronic circuitry and comprising the steps of:

booking unfilled buy offers including associated price and quantity parameters on a buy offer list comprised in the storage portion of the electronic computer in a priority sequence according to a first predetermined program, each of said buy offers having associated therewith a subscriber reference code designation;

booking unfilled sell offers including associated price and quantity parameters on a sell offer list comprised in the storage portion of the electronic computer in a priority sequence according to a second predetermined program, each of said sell offers having associated therewith a subscriber reference code designation;

comparing within the comparator circuitry of the electronic computer in said priority sequence, the price and quantity parameters of each incoming offer with the corresponding parameters of each offer on the complementary one of said lists;

automatically transacting within a portion of the other electronic circuitry of the electronic computer said incoming offer with the higher priority offers on said complementary list if said incoming offer can be matched against one or more offers on the complementary offer list; and

booking, in the storage portion of the electronic computer, the untransacted portion of said received offer on the corresponding one of said offer lists in a priority sequence according to the corresponding one of said predetermined programs if said incoming offer cannot be completely matched against offers on the complementary offer list.

2. The method of claim 1 further comprising the steps of:

assigning unique offer identification code designations to each offer; and

automatically transacting offers with reference to said identification designations so that the identification of each offer listed or filled will be by the appropriate one of said offer identification designations.

3. The method of claim 2 further comprising the steps of:

associating automatically by the electronic computer each offer identification code designation with a subscriber reference code designation and maintaining the association between each subscriber reference code designation and the identity of its corresponding subscriber in the storage portion of the electronic computer in a manner inaccessible to the other subscribers.

4. The method of claim 1 wherein:

said first predetermined program controlling the sequence of buy offer listing gives first priority to price in descending magnitude and second priority to time of entry of the buy offer, so that said step of comparing, when involving an incoming sell offer, will automatically start with the highest price buy offer on said buy offer list and will automatically compare in the comparator circuitry of the electronic computer all buy offers having the same price as a contiguous subgroup having a subgroup sequence such that earlier buy offer entries are automatically compared first; and

said second predetermined program controlling the sequence of sell offer listing gives first priority to price in ascending magnitude and second priority to time of entry of the sell offer, so that said step of comparing, when involving an incoming buy offer, will automatically start with the lowest price sell offer on said sell offer list and will automatically compare in the comparator circuitry of the electronic computer all sell offers having the same price as a contiguous subgroup having a subgroup sequence such that sell offer earlier entries are automatically compared first.

5. The method of claim 4 wherein said step of automatically transacting comprises the steps of:

matching within the other electronic circuitry of the electronic computer by quantity portions of each incoming offer against complementary offers on the complementary offer list in the priority sequence of the offers on the complementary list which have an offer price equal to or better than the offer price of said incoming offer, until either all of said incoming offer has been transacted or until all of the offers in said subgroup have been transacted; and

automatically transacting each matched portions of offers at the offer price of said incoming offer.

6. The method of claim 5 further comprising:

assigning unique offer identification code designations to each offer;

automatically transacting offers with reference to said identification designations so that the identification of each offer listed or filled will be by the appropriate one of said identification designations;

associating each offer identification code designation with a subscriber reference code designation; and

maintaining the association between each subscriber reference code designation and the identity of its corresponding subscriber in the storage portion of the electronic computer in a manner inaccessible from the other subscribers.

7. The method of claim 1 further comprising the steps of:

reading out from the storage portion of the electronic computer one of said offer lists; and

replying to selected one of the offers on the list read out.

8. The method of claim 7 further comprising the steps of:

automatically transacting said reply to said selected offer if said reply matches said selected offer as determined by the other electronic circuitry of the electronic computer;

transmitting said reply to the subscriber making said selected offer if said reply does not match said selected offer as determined by the other electronic circuitry of the electronic computer; and

storing into the storage portion of the electronic computer said reply in a reply list if said reply is transmitted to said subscriber.

9. The method of claim 8 further comprising the steps of:

further replying to said prior reply;

automatically transacting said further reply if said replies match as determined by the other electronic circuitry of the electronic computer; and

transmitting said further reply to the subscriber making said prior reply if said replies do not match as determined by the other electronic circuitry of the electronic computer.

10. The method of claim 9 further comprising:

assigning unique offer identification code designations to each offer;

assigning unique reply identification code designations to each reply;

automAtically transacting offers with reference to said identification designations so that the identification of each offer and reply listed or filled will be by the appropriate one of said identification code designation;

maintaining the association between each subscriber reference code designation and the identity of its corresponding subscriber in the storage portion of the electronic computer in a manner inaccessible from the other subscribers.

11. The method of claim 9 further comprising the step of:

placing a hold on said selected offer in the offer list read out if said further reply does not match said prior reply as determined by the other electronic circuitry of the electronic computer to prevent said selected offer from being automatically transacted by a third party.

12. The method of claim 11 wherein said hold is automatically placed within the electronic computer on said selected offer.

13. The method of claim 1 further comprising the steps of:

broadcasting an offer incoming to the electronic computer to a plurality of subscribers over a first communication channel; and

transmitting replies from said plurality of subscribers to the subscriber whose incoming offer is broadcast over a second communication channel separate from said first communication channel.

14. The method of claim 13 further comprising the steps of:

further replying over a communication channel by said subscriber whose offer is broadcast to selected ones of said subscribers making said prior replies;

automatically transacting by the electronic computer, said further reply if said replies match as determined by the other electronic circuitry of the electronic computer; and

transmitting said further reply to said selected subscribers making said prior reply if said replies do not match as determined by the other electronic circuitry of the electronic computer.

15. The method of claim 14 further comprising:

assigning unique offer identification code designations to each offer and reply;

automatically transacting offers with reference to said identification designations so that the identification of each offer and reply listed or filled will be by the appropriate one of said identification designations;

associating each offer identification code designation with a subscriber reference code designation with; and

maintaining the association between each subscriber reference code designation and the identity of its corresponding subscriber in the storage portion of the electronic computer in a manner inaccessible from the other subscribers.

16. The method of claim 14 further comprising the step of:

placing a hold on the broadcast incoming offer on the corresponding offer list if said replies do not match as determined by the other electronic circuitry of the electronic computer to prevent said incoming broadcast offer from being automatically transacted by a third party.

17. The method of claim 16 wherein said hold is automatically placed within the electronic computer on said broadcast offer.

18. The method of claim 13 further comprising the step of:

further replying over a communication channel by said subscriber whose offer is broadcast to selected ones of said subscribers making said prior replies.