Hybrid trading system for concurrently trading securities or derivatives through both electronic and open-outcry trading mechanisms
View Patent ↗A system and method of allocating orders in an exchange configured for trading by a combination of electronic and open-outcry trading mechanisms is provided. One method includes permitting multiple quotes to be disseminated to the market, but limiting market making to only those entities having a physical presence on the floor of the exchange. Methods of enhancing the hybrid electronic and open-outcry exchange also include automatically eliminating crossed quotes and locked quotes while permitting certain orders to trade against locked quotes.
1. A method of routing orders for derivatives in an exchange having both real-time screen-based trading and open-outcry trading capabilities for a derivative, the method comprising:
receiving, via a computer workstation, electronic orders at a derivatives trade engine;
concurrently receiving, via an exchange electronic quoting device, at the derivatives trade engine and in open-outcry, quotes generated by a plurality of market makers for a particular derivative, wherein the plurality of market makers are physically present on the trading floor;
determining, via a trade processor, whether at least a portion of the electronic orders qualify for immediate execution according to a first order routing rule or open-outcry trading according to a second order routing rule;
automatically allocating, via the trade processor, a portion of the electronic orders from the derivatives trade engine for immediate execution based on the determination according to the first order rule;
automatically allocating, via the trade processor, a portion of the electronic orders from the derivatives trade engine to a trading floor for open-outcry trading based on the determination according to the second order rule; and
automatically routing, via the trade processor, any remaining portion of the electronic orders to an electronic order book after the allocation of electronic orders for immediate execution and open-outcry trading.
2. The method of claim 1 ,
wherein market makers, permitted to disseminate quotes, disseminate quotes by entering a quote electronically into the exchange electronic quoting device.
3. The method of claim 2 ,
wherein the market makers, permitted to disseminate quotes, also disseminate a quote by public outcry on the trading floor of the exchange in response to a request for a quote.
4. The method of claim 1 ,
further comprising allowing a broker/dealer physically present on the trading floor to place electronic orders for immediate execution while denying access to placing electronic orders for immediate execution to any broker/dealer not physically present on the trading floor.
5. The method of claim 1 ,
further comprising sending an electronic order from an ICM that did not immediately execute to the electronic order book while sending an electronic order from a non-ICM that did not immediately execute directly to the trading floor.
6. The method of claim 1 ,
wherein the exchange manages a plurality of classes of derivatives, each of the plurality of classes of derivatives associated with an underlying asset.
7. The method of claim 6 ,
wherein the underlying asset comprises one of a stock, a bond, a note, a future, an exchange traded fund, an index or a commodity.