Diverse options order types in an electronic guaranteed entitlement environment
An enhanced system and method for handling, matching and executing a diverse group of limit-priced orders in an electronic options environment is disclosed. Most of the order types disclosed are automatically repriced and reposted as the NBBO changes to increase their execution opportunities. Market maker entitlements are integrated with the order processing, so that the market maker is guaranteed an allocation of the trade if the market maker is at the NBBO when an order priced at or better than the NBBO is received. Once posted to the order book, the displayed price of an order may be eligible for preferential execution in a market maker entitlement process, regardless of whether the displayed price is original or has been automatically repriced.
1. A system for automatically cancelling portions of orders, the system comprising:
a memory storing code; and
a processor executing the code, thereby causing the system to:
generate an order matching engine, said order matching engine maintaining an order book and a market maker quote book, said order book storing contra-side orders associated with an option series and said market maker quote book storing orders associated with a respective option series,
generate an away market quote engine, said away market quote engine maintaining an away market best bid and offer book that is separate from the order book and the market maker quote book, said away market best bid and offer book storing away market quotes received from one or more away market center systems,
analyze, by the away market quote engine, an away market quote stored in the away market best bid and offer book, and determine whether the away market quote has moved into or away from a price of a contra-side order stored in the order book, and
automatically cancel, by the order matching engine, at least a portion of the contra-side order based on an extent to which said away market quote has moved into or away from the price of the contra-side order.
2. The system of claim 1 , wherein the processor executes code to further cause the system to execute a transaction involving a non-cancelled portion of the contra-side order.
3. The system of claim 1 , wherein the order matching engine is further configured to evaluate the contra-side order according to pre-programmed rules, said pre-programmed rules dictating whether said contra-side order is automatically cancelled, repriced or both.
4. The system of claim 1 , wherein the away market quote is associated with a specified option series maintained on the system, and wherein the contra-side order comprises an automatically repriceable order that is also associated with said specified option series.
5. The system of claim 1 , wherein the contra-side order comprises a stand-your-ground inside limit order.
6. The system of claim 5 , wherein the processor executes code to further cause the system to initiate at least one of a lead market maker guarantee entitlement process, a display order process, a working order process, and a routing process, and
wherein the system attempts to execute a transaction involving a non-cancelled portion of the stand-your-ground inside limit order via at least one of the lead market maker guarantee entitlement process, the display order process, the working order process, and the routing process, and any remaining portion of the non-cancelled portion of the stand-your-ground inside limit order is posted to the order book at a repriced price.
7. The system of claim 1 , wherein the contra-side order comprises a sweep limit order.
8. The system of claim 1 , wherein the processor executes code to further cause the system to initiate at least one of a lead market maker guarantee entitlement process, a display order process, a working order process, and a routing process, and
wherein the system attempts to execute a transaction involving a non-cancelled portion of the sweep limit order via at least one of the lead market maker guarantee entitlement process, the display order process, the working order process, and the routing process, and any remaining portion of the non-cancelled portion of the sweep limit order is posted to the order book at a repriced price.
9. The system of claim 1 , wherein the contra-side order comprises an intermarket sweep limit order.
10. The system of claim 9 , wherein the processor executes code to further cause the system to initiate at least one of a lead market maker guarantee entitlement process, a display order process, a working order process, and a routing process, and
wherein the system attempts to execute a transaction involving a non-cancelled portion of the intermarket sweep limit order via at least one of the lead market maker guarantee entitlement process, the display order process, the working order process, and the routing process, and any remaining portion of the non-cancelled portion of the intermarket sweep limit order is posted to the order book at a repriced price.
11. The system of claim 1 , wherein the contra-side order comprises a reprice-and-ship inside limit order.
12. The system of claim 11 , wherein the processor executes code to further cause the system to initiate a lead market maker guarantee entitlement process,
wherein the away market quote engine determines that the away market quote has moved into the price of the contra-side order, and
wherein system attempts to execute a transaction involving a non-cancelled portion of the reprice-and-ship inside limit order via the lead market maker guarantee entitlement process and then routes the non-cancelled portion of the reprice-and-ship inside limit order to the away market quote that moved into its display price.
13. The system of claim 1 , wherein:
if the away market quote engine determines that the away market quote has moved away from the price of the contra-side order, the order matching engine is configured to reprice a non-cancelled portion of the contra-side order to have a price that is more aggressive than the price of the contra-side order, and
if the away market quote engine determines that the away market quote has moved into the price of the contra-side order, the order matching engine determines whether the non-cancelled portion of the contra-side order needs to be priced less aggressively, and upon determining that the non-cancelled portion of the contra-side order does need to be priced less aggressively, reprices the non-cancelled portion of the contra-side order to have less aggressive price.
14. A computer-implemented method for automatically cancelling portions of orders, the method comprising:
providing a system comprising a memory storing code and a processor executing the code, said code defining an order matching engine and an away market quote engine,
said order matching engine maintaining an order book storing contra-side orders associated with an option series, and a market maker quote book storing orders associated with a respective option series, and
said away market quote engine maintaining an away market best bid and offer book that is separate from the order book and the market maker quote book, said away market best bid and offer book storing away market quotes received from one or more away market center systems;
analyzing, by the away market quote engine, an away market quote stored in the away market best bid and offer book, and determining whether the away market quote has moved into or away from a price of a contra-side order stored in the order book; and
automatically cancelling, by the order matching engine, at least a portion of the contra-side order based on an extent to which said away market quote has moved into or away from the price of the contra-side order.
15. The method of claim 14 , further comprising:
executing a transaction involving a non-cancelled portion of the contra-side order.
16. The method of claim 14 , further comprising:
evaluating, by the order matching engine, the contra-side order according to pre-programmed rules; and
determining, by the order matching engine based on said pre-programmed rules, whether said contra-side order is automatically cancelled, repriced or both.
17. The method of claim 14 , wherein the away market quote is associated with a specified option series maintained on the system, and wherein the contra-side order comprises an automatically repriceable order that is also associated with said specified option series.
18. The method of claim 14 , wherein the contra-side order comprises a stand-your-ground inside limit order.
19. The method of claim 18 , further comprising:
initiating, by the system, at least one of a lead market maker guarantee entitlement process, a display order process, a working order process, and a routing process;
executing, by the system, a transaction involving a non-cancelled portion of the stand-your-ground inside limit order via at least one of the lead market maker guarantee entitlement process, the display order process, the working order process, and the routing process; and
posting, by the system, any remaining portion of the non-cancelled portion of the stand-your-ground inside limit order to the order book at a repriced price.
20. The method of claim 14 , wherein the contra-side order comprises a sweep limit order.
21. The method of claim 14 , further comprising:
initiating, by the system, at least one of a lead market maker guarantee entitlement process, a display order process, a working order process, and a routing process;
executing, by the system, a transaction involving a non-cancelled portion of the sweep limit order via at least one of the lead market maker guarantee entitlement process, the display order process, the working order process, and the routing process; and
posting, by the system, any remaining portion of the non-cancelled portion of the sweep limit order to the order book at a repriced price.
22. The method of claim 14 , wherein the contra-side order comprises an intermarket sweep limit order.
23. The method of claim 22 , further comprising:
initiating, by the system, at least one of a lead market maker guarantee entitlement process, a display order process, a working order process, and a routing process;
executing, by the system, a transaction involving a non-cancelled portion of the intermarket sweep limit order via at least one of the lead market maker guarantee entitlement process, the display order process, the working order process, and the routing process; and
posting, by the system, any remaining portion of the non-cancelled portion of the intermarket sweep limit order to the order book at a repriced price.
24. The method of claim 14 , wherein the contra-side order comprises a reprice-and-ship inside limit order.
25. The method of claim 24 , further comprising:
initiating, by the system, a lead market maker guarantee entitlement process;
determining, by the away market quote engine, that the away market quote has moved into the price of the contra-side order;
executing, by the system, a transaction involving a non-cancelled portion of the reprice-and-ship inside limit order via the lead market maker guarantee entitlement process; and
routing, by the system, the non-cancelled portion of the reprice-and-ship inside limit order to the away market quote that moved into its display price.
26. The method of claim 14 , wherein:
if the away market quote engine determines that the away market quote has moved away from the price of the contra-side order, the order matching engine performs the further step of repricing a non-cancelled portion of the contra-side order to have a price that is more aggressive than the price of the contra-side order, and
if the away market quote engine determines that the away market quote has moved into the price of the contra-side order, the order matching engine determines whether the contra-side order needs to be priced less aggressively, and upon determining that the contra-side order does need to be priced less aggressively, performs the further step of repricing the non-cancelled portion of the contra-side order to have less aggressive price.