Patent Application
20120072326
The present invention relates to systems and methods that are utilized in connection with the trading of financial instruments. More particularly, trade templates tradable price levels are created to define groups of orders for financial instruments that may be combined such that all of the orders are matched.
Traders often desire to trade defined combinations of financial instruments. For example, butterfly and calendar spread products consist of well defined legs. Typically an exchange attempts to match an order for a spread product with another order for the same spread product. Some existing exchanges attempt to match orders for spread products with multiple orders for legs of the spread products. With such systems, every spread product contract is broken down into a collection of legs and an attempt is made to match orders for the legs. Each leg of a spread instrument may in turn be either an outright or a leg of a spread instrument and is matched against an order for the same instrument.
Large exchanges typically list numerous outright and spread instruments. Market liquidity can be limited by segregating orders into numerous order books with limited ability to match combinations of orders.
Therefore, there exists a need in the art for improved systems and methods for matching groups of orders for financial instruments.
Aspects of the invention overcome at least some of the above problems and limitations by providing systems and methods for matching orders that utilize one or more trade templates. The trade templates define groups of orders for financial instruments that may be combined such that all of the orders' legs are matched and may include price thresholds needed for each order or a component of the template. The orders may include a plurality of orders for spread products, mini-to-big products, and outright products.
Various embodiments of the invention utilize collections of orders needed to complete a trade template. When a new order is received, the order is compared to the collection of needed orders and tradable price levels to determine whether a trade template can be completed. When the trade template can be completed, orders for financial instruments that form the template may be executed contemporaneously.
In other embodiments, the present invention can be partially or wholly implemented on a computer-readable medium, for example, by storing computer-executable instructions or modules, or by utilizing computer-readable data structures.
Of course, the methods and systems of the above-referenced embodiments may also include other additional elements, steps, computer-executable instructions, or computer-readable data structures. In this regard, other embodiments are disclosed and claimed herein as well. The details of these and other embodiments of the present invention are set forth in the accompanying drawings and the description below. Other features and advantages of the invention will be apparent from the description and drawings, and from the claims.
Aspects of the invention may take physical form in certain parts and steps, embodiments of which will be described in detail in the following description and illustrated in the accompanying drawings that form a part hereof, wherein:
a, 5b and 5c illustrate a process for matching legs of instruments to create a template, in accordance with an embodiment of the invention;
The present invention may take physical form in certain parts and steps, embodiments of which will be described in detail in the following description and illustrated in the accompanying drawings that form a part hereof
Aspects of the present invention are preferably implemented with computer devices and computer networks that allow users to exchange trading information. An exemplary trading network environment for implementing trading systems and methods is shown in
An exchange computer system 100 receives orders and transmits market data related to orders and trades to users. Exchange computer system 100 may be implemented with one or more mainframe, desktop or other computers. In one embodiment, a computer device uses a 64-bit processor. A user database 102 includes information identifying traders and other users of exchange computer system 100. Data may include user names and passwords. An account data module 104 may process account information that may be used during trades. A match engine module 106 is included to match bid and offer prices. Match engine module 106 may be implemented with software that executes one or more algorithms for matching bids and offers. A trade database 108 may be included to store information identifying trades and descriptions of trades. In particular, a trade database may store information identifying the time that a trade took place and the contract price. An order book module 110 may be included to compute or otherwise determine current bid and offer prices. A market data module 112 may be included to calculate market data, collect market data and prepare the data for transmission to users. A risk management module 134 may be included to compute and determine a user's risk utilization in relation to the user's defined risk thresholds. An order processing module 136 may be included to decompose delta based and bulk order types for processing by order book module 110 and match engine module 106.
The trading network environment shown in
Computer device 114 is shown directly connected to exchange computer system 100. Exchange computer system 100 and computer device 114 may be connected via a T1 line, a common local area network (LAN) or other mechanism for connecting computer devices. Computer device 114 is shown connected to a radio 132. The user of radio 132 may be a trader or exchange employee. The radio user may transmit orders or other information to a user of computer device 114. The user of computer device 114 may then transmit the trade or other information to exchange computer system 100.
Computer devices 116 and 118 are coupled to a LAN 124. LAN 124 may have one or more of the well-known LAN topologies and may use a variety of different protocols, such as Ethernet. Computers 116 and 118 may communicate with each other and other computers and devices connected to LAN 124. Computers and other devices may be connected to LAN 124 via twisted pair wires, coaxial cable, fiber optics or other media. Alternatively, a wireless personal digital assistant device (PDA) 122 may communicate with LAN 124 or the Internet 126 via radio waves. PDA 122 may also communicate with exchange computer system 100 via a conventional wireless hub 128. As used herein, a PDA includes mobile telephones and other wireless devices that communicate with a network via radio waves.
One or more market makers 130 may maintain a market by providing constant bid and offer prices for a derivative or security to exchange computer system 100. Exchange computer system 100 may also exchange information with other trade engines, such as trade engine 138. One skilled in the art will appreciate that numerous additional computers and systems may be coupled to exchange computer system 100. Such computers and systems may include clearing, regulatory and fee systems.
The operations of computer devices and systems shown in
Of course, numerous additional servers, computers, handheld devices, personal digital assistants, telephones and other devices may also be connected to exchange computer system 100. Moreover, one skilled in the art will appreciate that the topology shown in
Templates for a variety of acceptable trades may be included in a collection of possible trade templates 212. The collection of possible trade templates 212 may identify the structures of a variety of different trades that may involve spread products and other combinations of financial instruments.
A computer device 214 may be used to add new templates, such as new template 216, to the collection of possible trade templates 212. A plurality of algorithms may be used to create templates and such templates may be added on the fly or during a trading session. In some embodiments computer device may display a graphical user interface to a user that allows the user to create new templates. In other embodiments, described in detail below, computer device 214 may be programmed with computer-executable instructions to analyze instruments and suggest new templates.
A collection of tradable price levels 218 may also be coupled to match engine 204. Tradable price levels may be cached in the context of a needed order for a given template. Tradable price levels are described in detail below. In alternative embodiments various collections may be stored in a processor memory, such as a processor memory of match engine 204.
Next, in step 306 a new order is received. The order may be received at match engine 204. In step 308, it is determined whether the new order matches one of the needed orders. For example, it is determined whether the new order would result in one of the possible trade templates being complete. When the new order does match one of the needed orders, in step 310, a trade between the new order and an order that corresponds to the needed order may be executed. Step 310 may include executing a plurality of trades contemporaneously, such that all of the trades comprising a template are executed before the change in a market. When the new order does not match one of the needed orders, in step 312 an attempt is made to match the order with an order resting in an order book. Step 312 may include utilizing a conventional order match process. Step 312 may also include one or more of the steps shown in
When attempting to match orders, a match engine, such as match engine 204 selects orders having the best price. When a group of orders are combined in accordance with a template and one or more prices are unknown, last trade prices, previous settle prices or a variety of conventional algorithms may be used to determine prices. In one embodiment, an algorithm may use a group of linear equations to derive the price of one leg of a spread product.
Almost matched orders may also be used to create implied instruments. For example, in
Acceptable trade templates may be created by analyzing individual legs of a group of financial instruments.
When one of the legs of an instrument does not match a leg and another instrument already included in the template, the legs of other instruments may be analyzed to locate a match.
In step 608 it is determined whether the second instrument has a second leg. When the second instrument does not have a second leg, in step 610 a second leg of the first instrument is matched with a first leg of a third of instrument. When the second instrument has a second leg, in step 612 is determined whether the second leg of the second instrument matches a leg of the first instrument. When there is no match, in step 614 the second leg of the second instrument is matched with a leg of another instrument. Of course, if no match can be found, the process ends without the creation of an acceptable trade template. When the second leg of the second instrument matches a leg of the first instrument, in step 616 the second leg of the second instrument is matched with a leg of the first instrument.
In step 616 the process is repeated until all legs of all instruments are matched. Step 616 may include repeating different iterations of steps 606 through 616 until all legs are matched or it is determined that one or more legs cannot be matched.
After a template is created by matching all of the legs of the instruments in the template, in step 618 it is determined whether the number of instruments in the template exceeds a predetermined number. The predetermined number may be a maximum number of instruments that are allowed to comprise an acceptable trade template. When the number of instruments does not exceed the predetermined number, the template is saved as an acceptable trade template in step 622. When the number does exceed the predetermined number the process ends in step 624 and the template is not considered an acceptable trade template.
Some match systems that implement aspects of the invention will only attempt to match instruments that are included within templates. In such systems it may be desirable to ensure that all tradable instruments are included in at least one template.
Returning to step 705, when there are no longer any unmatched legs in the candidate template, in step 712 is determined whether the candidate template conforms to one or more predetermined constraints. The predetermined constraints may include maximum number of instruments that may be included in a template, limits on combinations of particular instruments and may be included in templates or any other criteria. When the candidate template does conform to the constraints, in step 714 the template is saved as an acceptable trade template. When the candidate template does not conform to the one or more predetermined constraints, in step 716 the candidate template is discarded. Finally, in step 718 it is determined whether there are still instruments that are not included in at least one template. When there are not, the process ends. When there are instruments that are not included in at least one template, the process returns to step 702.
Various embodiments of the invention may calculate minimum trade conditions for acceptable trade templates. For example, when a needed order is identified for an acceptable trade template, a minimum tradable price level for the needed order and/or orders for other financial instruments in the acceptable trade template may be determined.
While the sequence of unmatched orders 902 addresses all of the legs of template 800, the prices do not allow for matching of all of the legs. The unmatched orders do allow for the generation of collection of tradable price levels 904. For example, if a buy order for financial instrument A-B is received with a price of at least $20, all of the financial instruments in template 800 may be matched. Similarly, tradable price levels for other financial instruments that form template 800 may also be generated and are shown in
Generating a collection of tradable price levels allows for reduced processing when new orders arrive. Instead of analyzing the prices of all of the financial instruments that form a template, the price of the new order need only be compared to the appropriate tradable price level. Of course, when a new order arrives, the price may be compared to tradable price levels for multiple or numerous templates.
A new order may also result in a change to the collection of tradable price levels. In the example shown in
A new order is received in step 1006. The new order is for one of the component financial instruments and has a new order price level. Next, the new order price level may be compared to a tradable price level for a corresponding financial instrument in the collection of tradable price levels in step 1008. Step 1008, as well several or all of the remaining steps shown in
Of course, various embodiments disclosed above may be used together. For example, the processes and portions of the processes shown in
The present invention has been described herein with reference to specific exemplary embodiments thereof. It will be apparent to those skilled in the art that a person understanding this invention may conceive of changes or other embodiments or variations, which utilize the principles of this invention without departing from the broader spirit and scope of the invention as set forth in the appended claims.
