Quote inactivation system and method for an automated exchange for trading derivative securities
An automated system and method for trading option instruments on an automated exchange comprising a participant system for communicating with an automated exchange system. The disclosed system and method allows a market professional such as a market maker to inactivate the quotes in instruments for a related product while the market maker's quoting engine continues to update the quotes. Also disclosed is a system and method for reducing load on a exchange network in recalculating a best bid and offer price. Disclosed herein is a system and method for maintaining control over professional quotes for the purchase and sale of option instruments for a product in an exchange system.
1. A system for trading financial instruments on an automated exchange comprising:
a participant computer system for communicating with an automated exchange system including;
a processor;
a memory, the memory including
program memory for a quote engine that electronically generates a plurality of quotes for the purchase and sale of an instrument,
program memory for a program, that, when the processor executes program instructions, generates a quote handling instruction for the plurality of quotes for the instrument, wherein the quote handling instruction includes
instructing the exchange system to make the quotes inactive for a transaction thereon, wherein the quotes remain on the exchange system while inactive, and
instructing the exchange system to reactivate the quotes for a transaction thereon; and
an interface operatively connected to a network and adapted to transmit the quotes to the exchange system, and transmit the quote handling instruction to the exchange system; and
the automated exchange for trading a financial instrument, the automated exchange including:
a server having a processor;
an interface operatively connected to the network and adapted to receive the plurality of quotes for the purchase or sale of the instrument, and the quote handling instruction; and
a memory, the memory including
program memory for a program that, when the processor executes program instructions,
makes the received quotes unavailable for a transaction thereon if the received quote handling instruction instructs the exchange system to make the quotes inactive, wherein the quotes remain on the exchange system while inactive;
makes the received quotes available for a transaction thereon if the received quote handling instruction instructs the exchange system to reactivate the quotes;
executes an update of quotes on the exchange for a best bid and offer calculation;
calculates the best bid and offer as a function of the update; and
operates a timer configured to interpose a plurality of delays over a plurality of successive predetermined time periods upon the execution of a quote handling instruction,
wherein the quotes subject to the quote handling instruction do not trigger the update of the best bid and offer during a first time period, wherein the matching engine updates the best bid and offer triggered by quotes other than the quotes subject to the quote handling instruction during the first time period, and wherein a predetermined portion of the quotes subject to the quote handling instruction trigger the best bid and offer update after a subsequent time period of the plurality of time periods expires.
2. The system of claim 1 wherein the network that the participant's network interface is operatively connected to includes a plurality of networks, and the network by which the quote handling instruction is transmitted to the exchange system is independent of the network by which the plurality of quotes are transmitted to the exchange system.
3. The system of claim 1 wherein the instrument includes a plurality of instruments and the quote handling instruction includes instructions to inactivate and reactivate the quotes for some or all of the instruments.
4. The system of claim 3 wherein the plurality of quotes include quotes for the plurality of instruments in a plurality of products and the quote instruction includes an instruction selected from the group consisting of:
instructing the exchange system to make the quotes inactive for a transaction in all products;
instructing the exchange system to reactivate the quotes for a transaction in all products;
instructing the exchange system to make the quotes inactive for in a select product; and
instructing the exchange system to reactivate the quotes for a transaction in the select product.
5. The system of claim 1 wherein the quote handling instruction comprises a flag.
6. An automated exchange for trading a financial instrument, including:
a server having a processor,
an interface operatively connected to a network and adapted to receive a plurality of quotes for the purchase or sale of an instrument and a quote handling instruction; and
a memory, the memory including
program memory for a program that, when the processor executes program instructions,
makes the received quotes unavailable for a trade thereon if the received quote handling instruction instructs the exchange system to make the quotes inactive for a transaction thereon, wherein the quotes remain on the exchange system while inactive; and
makes the received quote available for a trade thereon if the received quote handling instruction instructs the exchange system to reactivate the quotes for a transaction thereon, the memory further including,
program memory for a matching engine that, when the processor executes program instructions, executes an update of quotes on the exchange for a best bid and offer calculation;
program memory for a program that, when the processor executes program instructions, calculates the best bid and offer as a function of the update; and
a timer configured to interpose a plurality of delays over a plurality of successive predetermined time periods upon the receipt of a quote handling instruction,
wherein the quotes subject to the quote handling instruction do not trigger the update of the best bid and offer during a first time period, wherein the matching engine updates the best bid and offer triggered by quotes other than the quotes subject to the quote handling instruction during the first time period, and wherein a predetermined portion of the quotes subject to the quote handling instruction trigger the best bid and offer update after a subsequent time period of the plurality of time periods expires.
7. The exchange of claim 6 wherein the network that the exchange's network interface is operatively connected to includes a plurality of networks, and the network that the quote handling instruction is received on is independent of the network that the plurality of quotes is received on.
8. The exchange of claim 6 wherein the instrument includes a plurality of instruments and the quote handling instructions include instructions to inactivate and reactivate the quotes for some or all of the instruments.
9. The exchange of claim 8 wherein the quotes are received for a plurality of instruments in a plurality of products, and the quote instructions include instructions selected from the group consisting of:
instructing the exchange system to make the quotes inactive for a transaction on all products;
instructing the exchange system to reactivate the quotes for a transaction on all products;
instructing the exchange system to make the quotes inactive for a select product; and
instructing the exchange system to reactivate the quotes for a transaction on the select product.
10. The exchange of claim 6 wherein the quote handling instruction comprises a flag.