Auctioning mechanisms for dark order block trading
Auctioning mechanisms adapted to improve the integrity of dark order block trading are 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:
monitor market data in an electronic market;
initiate an online auction responsive to at least one predetermined market condition based on the monitored market data, 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, the one or more firm limit orders received during the duration of the online auction;
screen, from the order book, the stored orders by comparing order data in the stored orders against a reference price to identify eligible firm limit orders and ineligible firm limit orders among the stored orders;
remove, from the order book, the ineligible firm limit orders among the one or more firm limit orders received during the duration of the online auction based on the comparison against the reference price; and
execute, from the order book, only a remainder of the one or more firm limit orders stored in the order book identified as the eligible firm limit orders.
2. The computer system of claim 1 , wherein the at least one predetermined market condition comprises a predetermined level of liquidity associated with the market data.
3. The computer system of claim 2 , wherein the predetermined level of liquidity is associated with bid and ask prices of the market data.
4. The computer system of claim 1 , wherein the online auction is initiated solely responsive to the at least one predetermined market condition.
5. The computer system of claim 1 , wherein the online auction is initiated with no auction initiation request.
6. The computer system of claim 1 , wherein the computer system is further configured to prevent storage, in the order book, of any firm limit orders received after the duration of the online auction.
7. 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.
8. The computer system of claim 1 , wherein the ineligible firm limit orders have a price that is higher than the reference price.
9. The computer system of claim 1 , wherein the ineligible firm limit orders have a price that is lower than the reference price.
10. The computer system of claim 1 , wherein the reference price is calculated from the monitored market data received during the duration of the online auction.
11. The computer system of claim 1 , wherein the online auction is initiated at a pre-determined time that is unknown to the market participants.
12. The computer system of claim 1 , wherein the computer system is further configured to determine, via a randomized timer, a randomized time for the duration of the online auction.
13. The computer system of claim 1 , wherein the computer system is further configured 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.
14. The computer system of claim 1 , wherein the computer system is further configured 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 a lowest total number of shares is defined as the light-side, and wherein the buy-side or the sell-side with a highest total number of shares is defined as the heavy-side.
15. The computer system of claim 14 , wherein the computer system is further configured 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.
16. The computer system of claim 15 , wherein the calculation comprises comparing two values, a first value representative of a 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.
17. The computer system of claim 15 , 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.
18. The computer system of claim 17 , 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.
19. The computer system of claim 14 , wherein the computer system is further configured to calculate a number of firm limit orders eligible to receive a fill on the heavy-side.
20. The computer system of claim 19 , 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.
21. The computer system of claim 20 , 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.
22. The computer system of claim 21 , 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.
23. The computer system of claim 22 , 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.
24. 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:
monitoring market data in an electronic market;
initiating an online auction responsive to at least one predetermined market condition based on the monitored market data, 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, the one or more firm limit orders received during the duration of the online auction;
screening, from the order book, the stored orders by comparing order data in the stored orders against a reference price to identify eligible firm limit orders and ineligible firm limit orders among the stored orders;
removing, from the order book, the ineligible firm limit orders among the one or more firm limit orders received during the duration of the online auction based on the comparison against the reference price; and
executing, from the order book, only a remainder of the one or more firm limit orders stored in the order book identified as the eligible firm limit orders.
25. The non-transitory computer-readable storage medium of claim 24 , wherein the at least one predetermined market condition comprises a predetermined level of liquidity associated with the market data.
26. The non-transitory computer-readable storage medium of claim 24 , wherein the online auction is initiated with no auction initiation request.
27. The non-transitory computer-readable storage medium of claim 24 , wherein the one or more firm limit orders comprise a dark order, the dark order not being visible to a broader market.
28. The non-transitory computer-readable storage medium of claim 24 , wherein the reference price is calculated from the monitored market data received during the duration of the online auction.
29. The non-transitory computer-readable storage medium of claim 24 , comprising further instructions that, when executed by the processor, further cause the processor to perform the step of:
determining, via a randomized timer, a randomized time for the duration of the online auction.
30. The non-transitory computer-readable storage medium of claim 24 , 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.