System and method for automated trading of financial interests
A derived order gives a participant simultaneous access to liquidity across multiple books, destinations, or marketplaces. The derived order can be placed and anchored in one trading venue and simultaneously replicated in another trading venue. A participant can place the derived order in the lit book as an anchor book and replicate the order in the hybrid book and/or the dark book, or alternatively, the participant can place the derived order in the hybrid book as an anchor book and replicate the order in the dark book. A trading engine can be configured to replicate an order in different books and guarantee that each order is only executed once. When an order is replicated, the trading engine can check the stored record to see where the order was placed, and then adjust or cancel an order in one book when it is being fulfilled in a different book.
1. A method implemented by a computer associated with a networked trading venue, the method comprising:
receiving, by the computer, a plurality of messages from a plurality of participant computer systems each associated with a corresponding participant, each of the plurality of messages comprising a trade order instruction relating to an identified instrument for execution by the computer, and one or more of the plurality of messages further comprising an indication of a preference to participate in an auction for the identified instrument;
upon a trigger to institute the auction, by the computer, calculating a national best bid or offer (NBBO) and determining which of the plurality of messages is eligible for participation in the auction based on whether the trade order instruction satisfies a threshold price and a threshold volume and whether the message comprises the indication of the preference to participate;
automatically transmitting, by the computer, an indication of interest (IOI) request to each participant computer system from which the eligible messages were received;
receiving, by the computer in near real time from transmitting the IOI request, a plurality of responses to the IOI requests, each response comprising a committed volume and a committed price for the identified instrument;
applying, by the computer, matching logic to automatically allocate the identified instrument at the NBBO in the auction; and
executing, by a router associated with the computer, one or more trades in the auction based upon the automatic allocation, wherein the router is configured for synchronized or controlled order routing.
2. The method according to claim 1 , wherein:
each of the plurality of messages further comprises a participant identifier for the corresponding participant;
determining which of the plurality of messages is eligible for participation in the auction is further based on the participant identifier.
3. The method according to claim 2 , wherein a message is ineligible if the participant identifier is associated with a participant whose historical ratio of indicating a preference to participate relative to responding to IOIT requests exceeds a threshold ratio.
4. The method according to claim 1 , wherein the IOI request is transmitted one second before the auction.
5. The method according to claim 1 , wherein the response from at least one participant computer system is automatically generated by the at least one participant computer system.
6. The method according to claim 1 , wherein the identified instrument is allocated at the NBBO to a buy order when the committed price associated with the buy order is greater than the NBBO.
7. The method according to claim 1 , wherein the committed price is a range of prices, or:
the committed price for a buy order is a maximum price, and/or the committed price for a sell order is a minimum price.
8. The method according to claim 1 , further comprising establishing, by the computer, the threshold price and the threshold volume for participating in the auction.
9. The method according to claim 1 , wherein the networked trading venue is a dark book.
10. The method according to claim 1 , wherein the allocation of identified instrument occurs in the following sequence: (1) subject to market maker volume allocation; (a) against offsetting liquidity providing orders entered by the same participant according to a time priority of an offsetting order; then (b) against offsetting liquidity providing orders according to size-time priority; then (2) against offsetting committed volume entered by the same participant according to a time priority of the committed volume; then (3) against offsetting committed volume according to size-time priority.
11. A system comprising a trading engine processor associated with a networked trading venue, the trading engine processor configured for:
receiving a plurality of messages from a plurality of participant computer systems each associated with a corresponding participant, each of the plurality of messages comprising a trade order instruction relating to an identified instrument for execution by the trading engine processor, and one or more of the plurality of messages further comprising an indication of a preference to participate in an auction for the identified instrument;
upon a trigger to institute the auction, calculating a national best bid or offer (NBBO) and determining which of the plurality of messages is eligible for participation in the auction based on whether the trade order instruction satisfies a threshold price and a threshold volume and whether the message comprises the indication of the preference to participate;
automatically transmitting an indication of interest (IOI) request to each participant computer system from which the eligible messages were received;
receiving, in near real time from transmitting the IOI request, a plurality of responses to the IOI requests, each response comprising a committed volume and a committed price for the identified instrument;
applying matching logic to automatically allocate the identified instrument at the NBBO in the auction; and
executing one or more trades in the auction based upon the automatic allocation, wherein the trading engine processor is configured for synchronized or controlled order routing.
12. The system according to claim 11 , wherein:
each of the plurality of messages further comprises a participant identifier for the corresponding participant;
determining which of the plurality of messages is eligible for participation in the auction is further based on the participant identifier.
13. The system according to claim 12 , wherein a message is ineligible if the participant identifier is associated with a participant whose historical ratio of indicating a preference to participate relative to responding to IOI requests exceeds a threshold ratio.
14. The system according to claim 11 , wherein the IOI request is transmitted one second before the auction.
15. The system according to claim 11 , wherein the response from at least one participant computer system is automatically generated by the at least one participant computer system.
16. The system according to claim 11 , wherein the identified instrument is allocated at the NBBO to a buy order when the committed price associated with the buy order is greater than the NBBO.
17. The system according to claim 11 , wherein the committed price is a range of prices, or:
the committed price for a buy order is a maximum price, and/or the committed price for a sell order is a minimum price.
18. The system according to claim 11 , wherein the trading engine processor is further configured for establishing the threshold price and the threshold volume for participating in the auction.
19. The system according to claim 11 , wherein the networked trading venue is a dark book.
20. The system according to claim 11 , wherein the allocation of identified instrument occurs in the following sequence: (1) subject to market maker volume allocation; (a) against offsetting liquidity providing orders entered by the same participant according to a time priority of an offsetting order; then (b) against offsetting liquidity providing orders according to size-time priority; then (2) against offsetting committed volume entered by the same participant according to a time priority of the committed volume; then (3) against offsetting committed volume according to size-time priority.