Fee/rebate contingent order matching system and method
A specialized computer matching system programmed to match orders for financial instruments of any type; where orders are matched at a price equal to the best available price or within the best available prices in the market; where priority of matching orders is ranked by price; where orders at the same price may be further ranked based on other attributes; where orders may optionally specify that the order sender is willing to pay a fee to (or receive a rebate by) an Order Matching Entity (i.e., a fee/rebate contingency (FRC)); where an order's optional FRC must be met in order to match the order; and where an order which cannot be matched solely because its FRC rate prevents it from matching with another order temporarily yields priority—other than price priority—to other orders ranked below to permit those orders to be matched.
1. A contingent order matching system (COMS) comprising:
at least one processor coupled to non-transitory memory, the non-transitory memory configured to store computer-readable instructions including an order handling algorithm;
a storage register configured to maintain an inventory of electronic orders, including resting orders, in a first format that is compliant with the COMS, wherein the resting orders are ranked according to a primary criteria comprising a price and a secondary criteria comprising one or more attributes other than price; and
a matching system configured to store computer-readable instructions including a matching algorithm,
the at least one processor configured to:
receive, over a network, buy orders and sell orders for a tradable interest in a second format that is only compliant for processing by an independent exchange system, at least some orders including fee/rebate contingency rate (FRC) information; and
execute the order handling algorithm that converts the buy orders and the sell orders in the second format to the first format that is compliant with the COMS, thereby obviating a need for multiple exchange systems, including said independent exchange system, said executing comprising:
validating the buy orders and the sell orders by determining whether any of the buy orders and the sell orders include requisite order information, to form one or more validated orders, and
electronically routing the one or more validated orders to the matching system, and
the matching system configured to match, by the matching algorithm, the one or more validated orders with one or more among the resting orders in the storage register, said matching according to a ranked priority which matches the resting orders first by the primary criteria and then by the secondary criteria, except when at least one resting order of the resting orders is determined to be unmatchable based on the FRC information, said at least one resting order, if matched yields priority to lower ranked resting orders in the storage register having a same primary criteria.
2. The COMS of claim 1 , wherein the COMS is part of one of an exchange and an over-the-counter market.
3. The COMS of claim 1 , wherein the at least one processor is further configured to:
receive orders which cross one or more of the electronic orders in the storage register which may not immediately be matched, to form crossed orders;
maintain the crossed orders in a crossed resting order book of the storage register for matching;
match at least one among the crossed orders held in the crossed resting order book with an inbound order when possible; and
match one or more among the crossed orders held in the crossed resting order book with other orders held in the crossed resting order book when possible.
4. The COMS of claim 1 , wherein the at least one processor is further configured to:
receive orders which lock one or more of the electronic orders in the storage register which may not immediately be matched, to form locked orders;
maintain the locked orders in a locked resting order book of the storage register for matching;
match at least one among the locked orders held in the locked resting order book with an inbound order when possible; and
match one or more among the locked orders held in the locked resting order book with other orders held in the locked resting order book when possible.
5. The COMS of claim 1 , wherein the matching system is further configured to:
give priority in said matching to first matchable orders at a same price where a combined fee or rebate requirement of the first matchable orders totals at least at a predetermined minimum value if the first matchable orders were matched; and
yield priority in said matching to second matchable orders at the same price where a combined fee or rebate requirement of the second matchable orders totals below the predetermined minimum value if the second matchable orders were matched.
6. The COMS of claim 1 , wherein the matching system is further configured to yield the priority of the at least one resting order determined to be unmatchable to said lower ranked resting orders for a predetermined time period.
7. The COMS of claim 1 , wherein the at least one resting order is determined to be unmatchable when a first fee/rebate contingency rate of the at least one resting order together with a second fee/rebate contingency rate of the one or more validated orders, if matched, is less than a predetermined threshold.
8. A non-transitory computer-readable medium storing computer-readable instructions that, when executed by one or more processing devices of a contingent order matching system (COMS), causes the one or more processing devices to perform the method steps comprising:
maintaining an inventory of electronic orders, including resting orders, on a storage register in a first format that is compliant with the COMS, wherein the resting orders are ranked according to a primary criteria comprising a price and a secondary criteria comprising one or more attributes other than price;
receiving, over a network, buy orders and sell orders for a tradable interest in a second format that is only compliant for processing by an independent exchange system, at least some orders including fee/rebate contingency rate (FRC) information; and
executing an order handling algorithm that converts the buy orders and the sell orders in the second format to the first format that is compliant with the COMS, thereby obviating a need for multiple exchange systems, including said independent exchange system, said executing comprising:
validating the buy orders and the sell orders by determining whether any of the buy orders and the sell orders include requisite order information, to form one or more validated orders,
electronically routing the one or more validated orders to a matching system, and
matching, by a matching algorithm of the matching system, the one or more validated orders with one or more among the resting orders in the storage register, said matching according to a ranked priority which matches the resting orders first by the primary criteria and then by the secondary criteria, except when at least one resting order of the resting orders is determined to be unmatchable based on the FRC information, said at least one resting order, if matched yields priority to lower ranked resting orders in the storage register having a same primary criteria.
9. The non-transitory computer-readable medium of claim 8 , wherein the COMS is part of one of an exchange and an over-the-counter market.
10. The non-transitory computer-readable medium of claim 8 , wherein the receiving of the buy orders and the sell orders further comprises receiving orders which cross one or more of the electronic orders in the storage register which may not immediately be matched, to form crossed orders, wherein the computer-readable instructions further causes the one or more processing devices to:
maintain the crossed orders in a crossed resting order book of the storage register for matching;
match at least one among the crossed orders held in the crossed resting order book with an inbound order when possible; and
match one or more among the crossed orders held in the crossed resting order book with other orders held in the crossed resting order book when possible.
11. The non-transitory computer-readable medium of claim 8 , wherein the receiving of the buy orders and the sell orders further comprises receiving orders which lock one or more of the electronic orders in the storage register which may not immediately be matched, to form locked orders, wherein the computer-readable instructions further causes the one or more processing devices to:
maintain the locked orders in a locked resting order book of the storage register for matching;
match at least one among the locked orders held in the locked resting order book with an inbound order when possible; and
match one or more among the locked orders held in the locked resting order book with other orders held in the locked resting order book when possible.
12. The non-transitory computer-readable medium of claim 8 , wherein the computer-readable instructions further causes the matching system to:
give priority in said matching to first matchable orders at a same price where a combined fee or rebate requirement of the first matchable orders totals at least at a predetermined minimum value if the first matchable orders were matched; and
yield priority in said matching to second matchable orders at the same price where a combined fee or rebate requirement of the second matchable orders totals below the predetermined minimum value if the second matchable orders were matched.
13. The non-transitory computer-readable medium of claim 8 , wherein said matching further comprises yielding the priority of the at least one resting order determined to be unmatchable to said lower ranked resting orders for a predetermined time period.
14. The non-transitory computer-readable medium of claim 8 , wherein the at least one resting order is determined to be unmatchable when a first fee/rebate contingency rate of the at least one resting order together with a second fee/rebate contingency rate of the one or more validated orders, if matched, is less than a predetermined threshold.