HYBRID TRADING SYSTEM FOR CONCURRENTLY TRADING THROUGH BOTH ELECTRONIC AND OPEN-OUTCRY TRADING MECHANISMS
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, and providing market making rights of varying degrees to entities having a physical presence on the floor of the exchange and entities remotely located away from the trading floor. The system includes a trade engine configured for receiving orders from market makers on and away from the trading floor. The system also includes executable instructions for allocating to designated primary market makers a portion of an incoming order remaining after first trading against public customer orders.
1 .- 17 . (canceled)
18 . An automated exchange system for the purchase or sale of securities or derivatives in an exchange configured for trading securities or derivatives comprising:
an electronic trade engine configured for receiving incoming orders generated by an market participant physically present at an open-outcry trading floor of an exchange or at a location remote to the open-outcry trading floor of the exchange;
an electronic book configured for storing the incoming orders received by the electronic trade engine;
a database comprising an allocation algorithm, the database in communication with the electronic trade engine; and
a trade processor in communication with the database for analyzing and executing orders according to an allocation algorithm selected from the database, the trade processor comprising:
a first set of instructions for determining a total number of market participants physically present at the open-outcry trading floor of an exchange and at a location remote to the open-outcry trading floor of the exchange at a matching price of an incoming electronic order;
a second set of instructions for determining a collective allocation percentage for market participants based on the total number of market participants located at the open-outcry trading floor of the exchange, and at locations remote to the open-outcry trading floor, at the matching price according to the relation:
allocation
percentage
=
[
1
number
of
participants
+
participant
quote
size
∑
participant
quote
sizes
2
]
and
a third set of instructions for allocating, among the market participants located at the open-outcry trading floor of the exchange, and at locations remote to the open-outcry trading floor, a portion of the incoming electronic order remaining after execution against any public customer orders based on the collective allocation percentage.
19 . The automated exchange system of claim 18 , wherein the third set of instructions further comprises instructions for multiplying the portion by the collective allocation percentage and then dividing a result by a total number of designated primary market makers.
20 . The automated exchange system according to claim 18 , wherein the third set of instructions further comprises multiplying the remainder allocated to a remote market maker by a fixed percentage.
21 . The method according to claim 19 , wherein the remainder is further divided equally among remote market makers at the price matching the incoming electronic order.