TRADING SYSTEM WITH ELFS AND UMPIRES
Price setting for a security occurs by automatically engaging in a price discovery procedure before responding to a request for a current buy or sell price of the security to provide an automatically discovered price that is better than a book price. The book price is the best price in an order book including orders to buy or sell specified quantities of the security at respective prices, the lowest sell order price of the booked orders being the book sell price, the highest buy order price of the booked orders being the book buy order price. The price discovery procedure includes providing the book buy or sell price to at least one entity registered to participate in the price discovery procedure. The entity automatically provides an improved price relative to the book price based on a predetermined strategy that is determined independently of the strategies for other entities. The temporal duration of the price discovery procedure can be predetermined or based on an amount of activity occurring during the price discovery procedure.
1 . A method of communicating price information for trading of a security, comprising:
configuring a software program with executable code and one or more parameters that define an order handling strategy of a first computer program entity,
executing the code on a computer to communicate price information for the security with a second computer program entity, wherein the price information is a book price or an improved price for the security, the improve price being higher than the book price for buying or lower than the book price for selling,
wherein the book price is obtained from an order book maintained by the second computer program entity, and
wherein the improved price is obtained from a third computer program entity.
2 . The method of claim 1 wherein the third computer program entity has previously registered with the second computer program entity.
3 . The method of claim 1 wherein the first computer program entity reveals at least a portion of its code or parameters that define its order handling strategy to the second or third computer program entities.
4 . The method of claim 1 , wherein the second computer program entity is identified by the first computer program entity as an entity with whom the first computer program entity will communicate price information.
5 . The method of claim 1 wherein the third computer program entity is identified by the first computer program entity as an entity with whom the first computer program entity will trade in the security.
6 . The method of claim 1 wherein the first computer program entity is identified by the second computer program entity as an entity with whom the second computer program entity will communicate price information.
7 . The method of claim 1 wherein the executable code and one or more parameters define the order handling strategy of the first computer program entity to represent an external market in the security to increase market depth for the security.