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;
receive, via at least one network, one or more firm limit orders from one or more market participants;
prevent storage, in an order book, of a first portion of the one or more firm limit orders based on one or more of a duration of the online auction and an order size;
store, in the order book, a second portion of the one or more firm limit orders to form stored orders;
screen, from the order book, the stored orders by comparing order data in the stored orders against a reference price to identify eligible stored orders and ineligible stored orders;
remove, from the order book, the ineligible stored orders;
sort the eligible stored orders remaining in the order book according to at least one predetermined parameter; and
execute, from the order book, the sorted eligible stored 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 a limit order of the first portion of the one or more firm limit orders is 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 stored orders have a price that is higher than the reference price.
9. The computer system of claim 1 , wherein the ineligible stored 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 one or more market participants.
12. The computer system of claim 1 , wherein the duration of the online auction is unknown to the one or more market participants.
13. 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.
14. 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 market participants, the notification excluding information as to the duration of the online auction.
15. The computer system of claim 1 , wherein the at least one predetermined parameter comprises one or more of the order size and an order time.
16. 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.
17. The computer system of claim 16 , 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.
18. The computer system of claim 17 , 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 a total number of shares on the light-side by a number of firm limit orders on the heavy-side, the maximum execution size being a minimum of the first value and the second value.
19. The computer system of claim 17 , 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.
20. The computer system of claim 19 , 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.
21. The computer system of claim 16 , wherein the computer system is further configured to calculate a number of firm limit orders eligible to receive a fill on the heavy-side.
22. The computer system of claim 21 , 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 a 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.
23. The computer system of claim 22 , 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.
24. The computer system of claim 23 , 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.
25. The computer system of claim 24 , 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.