System and method for improved order entry using market depth

• US 8,010,437 B2
• Filed: 10/26/2010
• Issued: 08/30/2011
• Est. Priority Date: 09/30/2004
• Status: Active Grant

• Current Assignee: Trading Technologies International, Inc.
• Original Assignee: Trading Technologies International, Inc.
• Inventors: Burns, Michael J., Singer, Scott F., Monroe, Fred
• Primary Examiner(s): Kalinowski; Alexander
• Assistant Examiner(s): Kanervo; Virpi H
• Application Number:
  US12/912,719
• Publication Number:
  US 20110040679A1
• Time in Patent Office: 308 Days
• Field of Search: None
• US Class Current: 705/36.00R
• 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

Abstract

Market depth information pertaining to the hedging side is utilized to intelligently break a non-hedging order into multiple orders, such that the orders rest at cascading price levels. This way, the trader can benefit from sweeps in the book and still properly accound for the market depth on the hedging side. Further, there is a greater probability of receiving “partials” on the spread order. In addition, hedge orders may be sent at multiple price levels, or sent to the market in pieces over time. By applying a more intelligent process to hedge orders (as opposed to “fire and forget”) an alternative beyond limit orders that can be leged or market orders is provided.

Claims

1. A method including:

receiving by a computing device a desired strategy quantity for a trading strategy at a desired strategy price, wherein the trading strategy is specified by a definition and includes a first leg for a first tradeable object and a second leg for a second tradeable object;

selecting by the computing device a first hedge price, wherein the first hedge price is a price level for the second tradeable object, wherein a first hedge quantity is available at the first hedge price;

generating by the computing device a first order for the first tradeable object, wherein the first order is at a first price for a first quantity, wherein the first price is determined based on the desired strategy price and the first hedge price, wherein the first quantity is determined based on the definition for the trading strategy, the desired strategy quantity, and the first hedge quantity;

selecting by the computing device a second hedge price, wherein the second hedge price is a price level for the second tradeable object, wherein a second hedge quantity is available at the second hedge price, wherein the second hedge price is different from the first hedge price;

generating by the computing device a second order for the first tradeable object, wherein the second order is at a second price for a second quantity, wherein the second price is determined based on the desired strategy price and the second hedge price, wherein the second quantity is determined based on the definition for the trading strategy, the desired strategy quantity, the second hedge quantity, and at least one of the first quantity and the first hedge quantity; and

initiating by the computing device placement of the first order and the second order.

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

3. The method of claim 1, wherein the first hedge price is one of a best bid price and a best ask price for the second tradeable object.

4. The method of claim 1, wherein the second hedge price is a next best price level with respect to the first hedge price.

5. The method of claim 1, wherein the first quantity is determined further based on a predefined maximum quantity.

6. The method of claim 1, wherein the definition for the trading strategy includes a leg ratio, wherein the first quantity and the second quantity are determined further based on the leg ratio.

7. The method of claim 1, wherein the placement of the first order is initiated at substantially the same time as the placement of the second order.

8. The method of claim 1, wherein the placement of the second order is initiated at a predetermined time interval after the placement of the first order.

9. The method of claim 1, wherein the first tradeable object and the second tradeable object are listed at the same electronic exchange.

10. The method of claim 1, further including:

initiating by the computing device placement of a hedge order when the first order has been at least partially filled, wherein the hedge order is for the second tradeable object at the first hedge price.

11. The method of claim 1, wherein the trading strategy includes a third leg for a third tradeable object.

12. The method of claim 1, wherein the computing device includes at least one of a trading station, a gateway, and a server.

13. A non-transitory computer readable medium having stored therein instructions executable by a processor, wherein the instructions are executable to:

receive a desired strategy quantity for a trading strategy at a desired strategy price, wherein the trading strategy is specified by a definition and includes a first leg for a first tradeable object and a second leg for a second tradeable object;

select a first hedge price, wherein the first hedge price is a price level for the second tradeable object, wherein a first hedge quantity is available at the first hedge price;

generate a first order for the first tradeable object, wherein the first order is at a first price for a first quantity, wherein the first price is determined based on the desired strategy price and the first hedge price, wherein the first quantity is determined based on the definition for the trading strategy, the desired strategy quantity, and the first hedge quantity;

select a second hedge price, wherein the second hedge price is a price level for the second tradeable object, wherein a second hedge quantity is available at the second hedge price, wherein the second hedge price is different from the first hedge price;

generate a second order for the first tradeable object, wherein the second order is at a second price for a second quantity, wherein the second price is determined based on the desired strategy price and the second hedge price, wherein the second quantity is determined based on the definition for the trading strategy, the desired strategy quantity, the second hedge quantity, and at least one of the first quantity and the first hedge quantity; and

initiate placement of the first order and the second order.

14. The computer readable medium of claim 13, wherein the trading strategy is a spread.

15. The computer readable medium of claim 13, wherein the first hedge price is one of a best bid price and a best ask price for the second tradeable object.

16. The computer readable medium of claim 13, wherein the second hedge price is a next best price level with respect to the first hedge price.

17. The computer readable medium of claim 13, wherein the first quantity is determined further based on a predefined maximum quantity.

18. The computer readable medium of claim 13, wherein the definition for the trading strategy includes a leg ratio, wherein the first quantity and the second quantity are determined further based on the leg ratio.

19. The computer readable medium of claim 13, wherein the placement of the first order is initiated at substantially the same time as the placement of the second order.

20. The computer readable medium of claim 13, wherein the placement of the second order is initiated at a predetermined time interval after the placement of the first order.

21. The computer readable medium of claim 13, wherein the first tradeable object and the second tradeable object are listed at the same electronic exchange.

22. The computer readable medium of claim 13, wherein the instructions are further executable to:

initiate placement of a hedge order when the first order has been at least partially filled, wherein the hedge order is for the second tradeable object at the first hedge price.

23. The computer readable medium of claim 13, wherein the trading strategy includes a third leg for a third tradeable object.