Systems and methods for commission allocation
The invention relates to systems and methods that allocate different types of commissions to participants based on at least one factor contributing to the liquidity to the market in which an item trades. The commission may accordingly depend on the order in which trading commands are received from different participants and/or the sides the participants are on. The systems and methods receive trade commands from different participants on the item, match these trade commands, determine a commission or reward based on the added liquidity and allocate the commission or reward to certain participants.
1 . A method implemented on an electronic trading system, the method comprising:
receiving a first trade command from a first participant to buy or sell an item at a desired price;
receiving a second trade command from a second participant to transact the item;
matching the first and second trade commands thereby executing a trade on the item;
determining a commission or reward based on an order in which the first and second trade commands are received; and
allocating the commission or reward to at least one of the first and second participants.
2 . The method of claim 1 further comprising determining the commission or reward based on a side of a trade of the first or second participant.
3 . The method of claim 1 further comprising determining the commission or reward based on a stage during which the each one of the at least one of the first and second participants starts or joins the trade.
4 . The method of claim 1 further comprising determining the commission or reward based on an extent of participation by the at least one of the first and second participants in the trade.
5 . The method of claim 1 further comprising determining the commission or reward based on the item being traded.
6 . The method of claim 1 wherein the commission or reward comprises a commission reduction.
7 . The method of claim 1 wherein the commission or reward comprises an amount calculated through a rate selected from the group consisting of a passive screen display rate, a screen activator rate, a passive joiner rate and an active joiner rate.
8 . The method of claim 1 wherein:
the first trade command comprises a bid/offer trade command and the second trade command comprises a hit/lift of at least a portion of the bid/offer trade command; and
the matching the first and second trade commands comprises interactively matching the hit/lift with the bid/offer trade command.
9 . The method of claim 1 wherein the matching the first and second trade commands comprises automatically matching the trade commands based on the desired price and a price associated with the second trade command.
10 . The method of claim 1 wherein the first and second participants are given exclusive rights to the trade additional size of the item during a determined time period.
11 . The method of claim 1 wherein the first and second participants are provided with a share of the trade based on the status of each of the first and second participants.
12 . The method of claim 1 wherein the first and second participants are provided with a share of the trade based on the market role of each of the first and second participants.
13 . The method of claim 1 wherein the first and second participants are provided with a share of the trade based on an existing pro-rata agreement.
14 . The method of claim 1 wherein the first trade command comprises a trade command to buy or sell the item at the market price.
15 . The method of claim 1 further comprising displaying the commission or reward to the at least one of the first and second participants.
16 . The method of claim 15 wherein the displaying the commission or reward to the at least one of the first and second participants occurs prior to the matching the first and second trade commands, the method further comprising displaying the commission or reward as part of a price displayed in connection with the item being traded.
17 . The method of claim 1 wherein:
the determining the commission or reward comprises identifying a participant who is a market-maker for the item; and
the allocating the commission or reward comprises reducing a commission charged to the market-maker participant.
18 . The method of claim 1 wherein the determining the commission or reward comprises assigning a participant placing a passive bid or offer on the item a first brokerage rate.
19 . The method of claim 18 further comprising assigning a participant on the active side of the trade a second brokerage rate that is higher than the first brokerage rate.
20 . The method of claim 19 further comprising assigning a participant who bids or offers additional size a third brokerage rate that is smaller than the second brokerage rate and greater than the first brokerage rate following the matching the first and second trade commands.
21 . The method of claim 20 further comprising assigning a participant who joins the participant who bids or offers additional size on the active side a fourth brokerage rate that is greater than the third brokerage rate.
22 . A method implemented on an electronic trading system, the method comprising:
receiving a first trade command from a first participant to buy or sell an item at a desired price;
receiving a second trade command from a second participant to transact the item;
identifying an active side and a passive side of a trade between the first and second participants; and
displaying a commission or reward to at least one of the first and second participants based on the identifying the active and passive sides of the trade.
23 . The method of claim 22 wherein the displaying the commission or reward comprises displaying to the participant on the active side of the trade a first commission that is higher than a second commission displayed to the participant on the passive side of the trade.
24 . The method of claim 22 wherein the displaying the commission or reward comprises displaying to the participant on the passive side of the trade a reduction of commission.
25 . The method of claim 22 further comprising matching the first and second trade commands thereby initiating a trading state for transacting the item.
26 . The method of claim 25 further comprising:
receiving a third trade command from a third participant to transact the item during the trading state;
determining whether the third participant is on the active or passive side of the trade; and
displaying a commission to the third participant based on the determination.
27 . An electronic trading system comprising a server that is coupled to a plurality of workstations, each of the workstations being adapted to communicate trading information relating to at least an item with the server, the server being adapted to:
receive a first trade command to buy or sell an item at a desired price, the first trade command being communicated from a first workstation used by a first participant to enter the first trade command;
receive a second trade command to transact the item, the second trade command being communicated from a second workstation used by a second participant to enter the second trade command;
match the first and second trade commands thereby executing a trade on the item;
determine a commission or reward based on an order in which the first and second trade commands are received; and
allocate the commission or reward to at least one of the first and second participants.
28 . The system of claim 27 wherein the server is further adapted to determine the commission or reward based on a side of a trade of the first or second participant.
29 . The system of claim 25 wherein the server is further adapted to determine the commission or reward based on a stage during which the each one of the at least one of the first and second participants starts or joins the trade.
30 . The system of claim 25 wherein the server is further adapted to determine the commission or reward based on an extent of participation by the at least one of the first and second participants in the trade.
31 . The system of claim 25 wherein the server is further adapted to determine the commission or reward based on the item being traded.
32 . The system of claim 27 wherein the commission or reward comprises a commission reduction.
33 . The system of claim 27 wherein the commission or reward comprises an amount calculated through a rate selected from the group consisting of a passive screen display rate, a screen activator rate, a passive joiner rate and an active joiner rate.
34 . The system of claim 27 wherein:
the first trade command comprises a bid/offer trade command and the second trade command comprises a hit/lift of at least a portion of the bid/offer trade command; and
the server is further adapted to match the first and second trade commands the hit/lift with the bid/offer trade command.
35 . The system of claim 27 wherein the server is further adapted to automatically match the first and second trade commands based on the desired price and a price associated with the second trade command.
36 . The system of claim 27 wherein the first and second participants are given exclusive rights to the trade additional size of the item during a determined time period.
37 . The system of claim 27 wherein the first and second participants are provided with a share of the trade based on the status of each of the first and second participants.
38 . The system of claim 27 wherein the first and second participants are provided with a share of the trade based on the market role of each of the first and second participants.
39 . The system of claim 27 wherein the first and second participants are provided with a share of the trade based on an existing pro-rata agreement.
40 . The system of claim 27 wherein the first trade command comprises a trade command to buy or sell the item at the market price.
41 . The system of claim 27 wherein the workstation is further adapted to display the commission or reward to the at least one of the first and second participants.
42 . The system of claim 41 wherein the workstation is further adapted to:
display the commission or reward to the at least one of the first and second participants prior to the matching the first and second trade commands; and
display the commission or reward as part of a price displayed in connection with the item being traded.
43 . The system of claim 27 wherein the server is further adapted to:
identify a participant who is a market-maker for the item; and
reduce a commission charged to the market-maker participant.
44 . The system of claim 27 wherein the server is further adapted to assign a participant placing a passive bid or offer on the item a first brokerage rate.
45 . The system of claim 44 wherein the server is further adapted to assign a participant on the active side of the trade a second brokerage rate that is higher than the first brokerage rate.
46 . The system of claim 45 wherein the server is further adapted to assign a participant who bids or offers additional size a third brokerage rate that is smaller than the second brokerage rate and greater than the first brokerage rate following the matching the first and second trade commands.
47 . The system of claim 46 wherein the server is further adapted to assign a participant who joins the participant who bids or offers additional size on the active side a fourth brokerage rate that is greater than the third brokerage rate.
48 . An electronic trading system comprising a server that is coupled to a plurality of workstations, each of the workstations being adapted to communicate trading information relating to at least an item with the server,
the server being adapted to:
receive a first trade command to buy or sell an item at a desired price, the first trade command being communicated from a first workstation used by a first participant to enter the first trade command;
receive a second trade command to transact the item, the second trade command being communicated from a second workstation used by a second participant to enter the second trade command;
identify an active side and a passive side of a trade between the first and second participants; and
at least one of the plurality of workstations being adapted to:
display a commission or reward to at least one of the first and second participants based on the identifying the active and passive sides of the trade.
49 . The system of claim 48 wherein the at least one of the plurality of workstations is further adapted to display to the participant on the active side of the trade a first commission that is higher than a second commission displayed to the participant on the passive side of the trade.
50 . The system of claim 48 wherein the at least one of the plurality of workstations is further adapted to display to the participant on the passive side of the trade a reduction of commission.
51 . The system of claim 48 wherein the server is further adapted to match the first and second trade commands thereby initiating a trading state for transacting the item.
52 . The system of claim 51 wherein:
the server is further adapted to receive a third trade command from a third participant to transact the item during the trading state;
the server is further adapted to determine whether the third participant is on the active or passive side of the trade; and
at least another one of the plurality of workstations is further adapted to display a commission to the third participant based on the determination.