Computer implemented and/or assisted methods and systems for providing rapid execution of, for example, listed options contracts using toxicity and/or profit analyzers
Methods and systems are provided which enable options broker-dealers to execute a listed options contract trade order while simultaneously eliminating (or at least reducing) exposure to the negative consequences associated with toxic (or likely toxic) trades in the options market. By using toxicity and/or profit analyzers, for example, to detect, track and respond to the level of toxic (or likely toxic) orders present in an option contract order flow, a broker dealer can reduce the level of risk inherent in serving as a counter-party in listed options transactions, and inherent in offering a rapid execution guarantee. Various alternative embodiments are also disclosed.
1. A method of executing an order for a listed options contract using a computer, the method at least one of implemented and assisted by the computer, comprising:
electronically receiving the order by a first computer order system, from a broker-dealer computer system;
electronically transmitting the order by the first computer order system to an options exchange for execution;
monitoring the outcome of the trade by the first computer order system when the order is sent to the options exchange for execution; and
if the first computer order system determines that the completed trade is toxic responsive to order characteristics comprising order parameters, market condition parameters and execution parameters and where a toxic trade is indicative of the order having a characteristic of one of no profit, reduced profit and a loss when at least one of a wholesaler and a market maker provides market liquidity, the first computer order system implementing a corrective action based at least in part on the step of monitoring the outcome of the trade.
2. The method of claim 1 , wherein the step of determining if the completed trade is toxic comprises the step of reviewing one or more parameters of the order relating to at least one of size of the order, frequency of order submission, identity of the option, market source of national-best-bid-or-offer (NBBO), order size relative to NBBO size, liquidity of the option contract in the market, liquidity of the underlying equity, current NBBO bid-offer spread, and option class of the order.
3. The method of claim 1 , further comprising the steps of:
electronically receiving the order from an order flow provider computer system; and
electronically transmitting the order from the order flow provider computer system to a broker-dealer computer system.
4. The method of claim 3 , further comprising the step of electronically transmitting a toxicity report to the order flow provider based at least in part on the toxic trade determination.
5. The method of claim 1 , further comprising the step of placing the order by an investor.
6. The method of claim 1 , further comprising the step of placing the order by an order flow provider.
7. The method of claim 1 , wherein the step of taking corrective action comprises modifying payment for the order.
8. The method of claim 1 , wherein the step of taking corrective action comprises modifying payment for future order flow.
9. The method of claim 1 , wherein the step of taking corrective action comprises increasing the fee for the investor that placed the order.
10. The method of claim 1 , wherein the step of taking corrective action comprises increasing the fee for future orders submitted by the investor that placed the order.