System and method for generating real-time indicators in a trading list or portfolio

• US 7,680,718 B2
• Filed: 06/29/2006
• Issued: 03/16/2010
• Est. Priority Date: 06/29/2005
• Status: Active Grant

• Current Assignee: Virtu ITG Software Solutions LLC
• Original Assignee: ITG Software Solutions, Inc. (Virtu Financial, Inc.)
• Inventors: Yang, Jian, Domowitz, Ian, Serbin, Vitaly, Brandes, Yossef, Borkovec, Milan, Sinclair, Robert D.
• Primary Examiner(s): Cheung; Mary
• Assistant Examiner(s): AMELUNXEN, BARBARA J
• Application Number:
  US11/476,895
• Publication Number:
  US 20070143198A1
• Time in Patent Office: 1,356 Days
• Field of Search: 705/10, 705/35, 705/36, 705/37, 705/36.R, 364/408
• US Class Current: 705/36.00R
• CPC Class Codes: G06Q 10/04 Forecasting or optimisation specially adapted for administrative or management purposes, e.g. linear programming or "cutting stock problem" market predictions or forecasting for commercial activities G06Q30/0202
• 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
• CPC Class Codes: G06Q 40/08 Insurance

Abstract

A system and method for detecting an abnormal trading condition of a security uses real-time and estimated values of one or more variables associated with the condition of the security to generate one or more analytic metrics that are compared to empirical distributions based on one or more peer groups for the security. An indicator can then be displayed to a trader as an indication of the abnormal condition.

Claims

1. A computer implemented method of detecting an abnormal condition of a security traded on an exchange, said method comprising the steps of:

receiving on a computer in real-time data from a remote data source via a digital communications link including a value of a first variable related to a condition of a first security;

estimating with a computer the value of the first variable based on historical market data for the first security;

calculating with a computer a first analytic metric based on a relationship between the value obtained by real-time monitoring and the value obtained by estimating;

retrieving with a computer a plurality of values of the first variable related to the condition of each of a plurality of securities in a peer group of the first security;

estimating with a computer a plurality of values of the first variable based on historical market data for each of the plurality of securities in the peer group;

calculating with a computer an empirical distribution of analytic metrics for the peer group, wherein the analytic metrics are based on relationships between the values of the first variable retrieved for members of the peer group and the values obtained by estimating;

comparing with a computer the first analytic metric for the first security with the empirical distribution of analytic metrics for the peer group to determine whether the condition of the first security is abnormal; and

displaying on a computer display an indicator reflective of abnormality in the condition of the first security.

2. The method of claim 1, wherein said step of receiving a real-time value of a first variable includes the step of periodically selecting a real-time value of a first variable from a stream of real-time values throughout a trading day;

wherein the historical market data is stored in a database, and further comprising the step of periodically updating the database using the stream of real-time values.

3. The method of claim 1, wherein said estimating step includes calculating a moving average of the value over a predetermined period of time using historical market data.

4. The method of claim 1, wherein said calculating step includes calculating at least one of relative volatility, relative volume, and relative cost.

5. The method of claim 1, wherein said calculating step includes calculating relative cost.

6. The method of claim 1, wherein empirical distributions of analytic metrics are stored in a peer group database and wherein said retrieving step includes retrieving the empirical distribution corresponding to a peer group of the first security from the peer group database;

wherein values of the first variable for a plurality peer groups are stored in a peer group database and wherein said retrieving step includes generating the empirical distribution of analytic metrics using values from the peer group database.

7. The method of claim 6, wherein said plurality of empirical distributions are based on a plurality of different peer groups.

8. The method of claim 1, wherein said retrieving step is performed periodically throughout a trading day at predetermined intervals, and each time a real-time value of the first variable is selected.

9. The method of claim 1, wherein said retrieving step includes defining a peer group and gathering data related to the peer group to generate the empirical distribution;

wherein the peer group is either defined statically based on at least one of industry sector, exchange and market capitalization or dynamically based on real-time data related to the peer group;

wherein the peer group is defined dynamically based on real-time data related to the peer group.

10. The method of claim 1, wherein said comparing step includes determining where the calculated analytic metric falls within the empirical distribution;

wherein said determining step includes describing where the calculated analytic metric falls within the empirical distribution in terms of percentile or in terms of standard deviation.

11. The method of claim 10, wherein said determining step includes describing where the calculated analytic metric falls within the empirical distribution in terms of standard deviation.

12. The method of claim 1, wherein the indicator in said displaying step is reflective of the degree of abnormality of the security condition based on said comparing step and includes at least one of a numerical value related to the degree of abnormality, a number of symbols, wherein the number of symbols is related to the degree of abnormality, and a color coded numerical value related to the degree of abnormality;

wherein symbols include at least one of up and down arrows and bars, the up arrows representing a condition in the upper half of the empirical distribution and the down arrows representing a condition in the lower half of the empirical distribution, the bars being on either side of a divider to represent a condition in the upper or lower half of the distribution.

13. The method of claim 1, further comprising the step of executing a trade based on said comparing step.

14. A system for generating an indicator of abnormality in the condition of a security traded on an exchange using real-time data from a remote source, said system comprising:

a computer including a processor and a memory device storing a set of machine readable instructions executable by said processor;

means for receiving data in real-time from the remote source via a digital communications link electronic including a real-time value of a first variable related to a condition of a first security;

and estimate means for retrieving historical market data for the first security and estimating the value of the first variable based on the historical market data for the first security;

means for calculating a first analytic metric for the first security based on a relationship between the value received in real-time and the value obtained by estimating;

means for retrieving a plurality of values of the first variable related to the condition of each of a plurality of securities in a peer group of the first security;

means for estimating a plurality of values of the first variable based on historical market data for each of the plurality of securities in the peer group;

means for calculating an empirical distribution of analytic metrics for the peer group, wherein the analytic metrics are based on relationships between the values of the first variable retrieved for members of the peer group and the values obtained by estimating;

means for comparing the first analytic metric for the first security with the empirical distribution of analytic metrics for the peer group to determine abnormality in the condition of the first security; and

means for displaying an indicator reflective of abnormality in the condition of the first security.

15. The system of claim 14, wherein said system receive means is configured to receive a stream of real-time values of the first variable and periodically selects a real-time value of the first variable from the stream of real-time values throughout a trading day.

16. The system of claim 14, wherein said first variable is return and wherein said analytic metric is relative volatility, or wherein said first variable is trading volume and wherein said analytic metric is relative volume.

17. The system of claim 14, wherein said receive means is configured to receive in real-time from a remote source real-time values of a plurality of variables related to a condition of the security;

wherein said variables include bid-ask spread, depth, volume, and volatility, and wherein said analytic metric is relative cost, or

said variables include return of the security over a first predetermined time period and return of a benchmark index over the first predetermined time, and wherein said analytic metric includes tracking statistics.

18. The system of claim 17, wherein said retrieve means is configured to retrieve a plurality of empirical distributions for a respective plurality of variables;

wherein said plurality of empirical distributions are based on one or more peer groups;

wherein said system includes a database containing values of the first variable for the peer group, and the system is configured to retrieve values of the first variable for the peer group from said databases and generate the empirical distribution using the peer group values from said database.

19. The system of claim 18, wherein said plurality of empirical distributions are based on a plurality of different peer groups.

20. The system of claim 14, wherein said retrieve means is configured to define a peer group and gather data related to the peer group to generate the empirical distribution;

wherein the peer group is defined either statically or dynamically based on real-time data related to the peer group.

21. The system of claim 14, wherein said compare means is configured to determine where the calculated analytic metric falls within the empirical distribution in terms of standard deviation or in terms of percentile.

22. The system of claim 14, further including a monitor and a set of machine readable instructions executable by a computer to display an indicator reflective of the degree of abnormality of the security condition on said monitor;

wherein said indicator includes one of symbols and a numerical value related to the degree of abnormality;

wherein said symbols can be one of up arrow and down arrows.

23. The system of claim 22, wherein said set of machine readable instructions further includes instructions executable by said processor to execute a trade.

24. The system of claim 14, wherein the means for calculating a first analytic metric, estimating a plurality of values of the first variable for each of the securities in the peer group, calculating an empirical distribution of analytic metrics, and comparing the first analytics metric with the empirical distribution of analytic metrics comprise the processor and memory device storing a set of machine readable instructions.

25. A computer program product for generating an indicator of abnormality in the condition of a security traded on an exchange, said computer program product comprising a digital storage media and a set of machine readable instructions stored on said digital storage media, wherein said instructions are executable by a computer to:

establish communication between the computer and a remote source;

receive electronic data via a digital communications link including a value of a first variable related to a condition of a first security in real-time from the remote source;

retrieve historical market data for the first security and estimate the value of the first variable based on the historical market data for the first security;

calculate a first analytic metric based on a relationship between the value received in real-time and the value obtained by estimating;

retrieve a plurality of values of the first variable related to the condition of each of a plurality of securities in a peer group of the first security;

estimate a plurality of values of the first variable based on historical market data for each of the plurality of securities in the peer group;

calculate an empirical distribution of analytic metrics for the peer group, wherein the analytic metrics are based on relationships between the values of the first variable retrieved for members of the peer group and the values obtained by estimating;

compare the first analytic metric for the first security with the empirical distribution of analytic quantities for the peer group to determine whether a condition of the first security is abnormal; and

display an indication reflective of abnormality in the condition of the first security.

26. The computer program product of claim 25, wherein said computer program product further includes instructions executable by the computer to estimate a value of the first variable by calculating a moving average of the value over a predetermined period of time using historical market data;

wherein said analytic metric includes a ratio of the real-time value of the first variable to the estimated value of the first variable; and

wherein said first variable is return and wherein said analytic metric is relative volatility, or wherein said first variable is trading volume and wherein said analytic metric is relative volume.