Auctioning mechanisms for dark order block trading
Auctioning mechanisms adapted to improve the integrity of dark order block trading is provided.
1. A computer system comprising:
a processor operatively coupled to a memory, the memory storing instructions that, when executed by the processor, cause the computer system to:
initiate an online auction, the online auction having a duration that is unknown to market participants;
receive one or more firm limit orders from one or more computer devices associated with the market participants;
store, in an order book within said memory, a first portion of the one or more firm limit orders, the first portion received during the duration of the online auction;
prevent storage, in the order book, of a second portion of the one or more firm limit orders, the second portion received after the duration of the online auction;
remove, from the order book, one or more ineligible firm limit orders from the first portion based on a reference price; and
execute a remainder of the firm limit orders from the first portion stored in the order book.
2. The computer system of claim 1 , wherein the one or more firm limit orders comprise a dark order, the dark order not being visible to a broader market.
3. The computer system of claim 1 , wherein the one or more ineligible firm limit orders have a price that is higher than the reference price.
4. The computer system of claim 1 , wherein the one or more ineligible firm limit orders have a price that is lower than the reference price.
5. The computer system of claim 1 , wherein the reference price is calculated from market data received during the duration of the online auction.
6. The computer system of claim 1 , wherein the online auction is initiated at a pre-determined time that is unknown to the market participants.
7. The computer system of claim 1 , further comprising a randomized timer configured to determine a randomized time for the duration of the online auction.
8. The computer system of claim 1 , wherein the processor executes the instructions to further cause the computer system to:
transmit a notification of the online auction to the one or more computer devices, the notification excluding information as to the duration of the online auction.
9. The computer system of claim 1 , wherein the processor executes the instructions to further cause the computer system to:
designate a buy-side or a sell-side as a light-side or a heavy-side in the online auction, wherein the buy-side or the sell-side with the lowest total number of shares is defined as the light-side, and wherein the buy-side or the sell-side with the highest total number of shares is defined as the heavy-side.
10. The computer system of claim 9 , wherein the processor executes the instructions to further cause the computer system to:
calculate a maximum execution size, the maximum execution size representative of a number of shares to be distributed to each firm limit order on the heavy-side.
11. The computer system of claim 10 , wherein the calculation comprises comparing two values, a first value representative of the smallest firm limit order size on the heavy-side and a second value representative of a computational value yielded by dividing the total number of shares on the light-side by the number of firm limit orders on the heavy-side, the maximum execution size being a minimum of the first value and the second value.
12. The computer system of claim 10 , wherein a first distribution of shares is distributed to each firm limit order on the heavy-side, each firm limit order on the heavy-side receiving the first distribution of shares equal to the maximum execution size calculated.
13. The computer system of claim 12 , wherein a second distribution of shares is distributed to each firm limit order on the heavy-side that has not been completely filled, the second distribution representative of a remaining balance of shares on the light-side after the first distribution of shares to each firm limit order on the heavy-side, the remaining balance of shares being distributed proportionally to each firm limit order on the heavy-side that has not been completely filled by the first distribution of shares.
14. The computer system of claim 9 , wherein the processor executes the instructions to further cause the computer system to calculate a number of firm limit orders eligible to receive a fill on the heavy-side.
15. The computer system of claim 14 , wherein the calculation comprises comparing two values, a first value representative of a number of firm limit orders on the heavy-side and a second value representative of a computational value yielded by dividing the total number of shares on the light-side by a minimum fill size, the number of firm limit orders eligible to receive a fill on the heavy-side being a minimum of the first value and the second value.
16. The computer system of claim 15 , wherein one or more firm limit orders on the heavy-side are eliminated when the minimum of the first value and the second value is less than the number of firm limit orders on the heavy-side.
17. The computer system of claim 16 , wherein a first distribution of shares is distributed to each firm limit order remaining on the heavy-side after the one or more firm limit orders on the heavy-side is eliminated, each firm limit order remaining on the heavy-side receiving the first distribution of shares equal to the minimum fill size.
18. The computer system of claim 17 , wherein a second distribution of shares is distributed to each firm limit order remaining on the heavy-side that has not been completely filled, the second distribution representative of a remaining balance of shares on the light-side after the first distribution of shares to each firm limit order remaining on the heavy-side, the remaining balance of shares being distributed proportionally to each firm limit order remaining on the heavy-side that has not been completely filled by the first distribution of shares.
19. A non-transitory computer-readable storage medium storing instructions that, when executed by a processor, cause the processor to perform a method, the method comprising:
initiating an online auction, the online auction having a duration that is unknown to market participants;
receiving one or more firm limit orders from one or more computer devices associated with the market participants;
storing, in an order book, a first portion of the one or more firm limit orders, the first portion received during the duration of the online auction;
preventing storage, in the order book, of a second portion of the one or more firm limit orders, the second portion received after the duration of the online auction;
removing, from the order book, one or more ineligible firm limit orders from the first portion based on a reference price; and
executing a remainder of the firm limit orders from the first portion stored in the order book.
20. The non-transitory computer-readable storage medium of claim 19 , wherein one or more firm limit orders comprise a dark order, the dark order not being visible to a broader market.
21. The non-transitory computer-readable storage medium of claim 19 , wherein the one or more ineligible firm limit orders have a price that is higher than the reference price.
22. The non-transitory computer-readable storage medium of claim 19 , wherein the one or more ineligible firm limit orders have a price that is lower than the reference price.
23. The non-transitory computer-readable storage medium of claim 19 , wherein the reference price is calculated from market data received during the duration of the online auction.
24. The non-transitory computer-readable storage medium of claim 19 , wherein the online auction is initiated at a pre-determined time that is unknown to the market participants.
25. The non-transitory computer-readable storage medium of claim 19 , comprising further instructions that, when executed by the processor, further cause the processor to perform the step of:
determining, by a randomized timer, a randomized time for the duration of the online auction.
26. The non-transitory computer-readable storage medium of claim 19 , comprising further instructions that, when executed by the processor, further cause the processor to perform the step of:
transmitting a notification of the online auction to the one or more computer devices, the notification excluding information as to the duration of the online auction.
27. The non-transitory computer-readable storage medium of claim 19 , comprising further instructions that, when executed by the processor, further cause the processor to perform the step of:
designating a buy-side or a sell-side as a light-side or a heavy-side in the online auction, wherein the buy-side or the sell-side with the lowest total number of shares is defined as the light-side, and wherein the buy-side or the sell-side with the highest total number of shares is defined as the heavy-side.
28. The non-transitory computer-readable storage medium of claim 27 , comprising further instructions that, when executed by the processor, further cause the processor to perform the step of:
calculating a maximum execution size, the maximum execution size representative of a number of shares to be distributed to each firm limit order on the heavy-side.
29. The non-transitory computer-readable storage medium of claim 28 , wherein the calculation comprises comparing two values, a first value representative of the smallest firm limit order size on the heavy-side and a second value representative of a computational value yielded by dividing the total number of shares on the light-side by the number of firm limit orders on the heavy-side, the maximum execution size being a minimum of the first value and the second value.
30. The non-transitory computer-readable storage medium of claim 28 , wherein a first distribution of shares is distributed to each firm limit order on the heavy-side, each firm limit order on the heavy-side receiving the first distribution of shares equal to the maximum execution size calculated, and
wherein a second distribution of shares is distributed to each firm limit order on the heavy-side that has not been completely filled, the second distribution representative of a remaining balance of shares on the light-side after the first distribution of shares to each firm limit order on the heavy-side, the remaining balance of shares being distributed proportionally to each firm limit order on the heavy-side that has not been completely filled by the first distribution of shares.