Auctioning mechanisms for dark order block trading
Auctioning mechanisms adapted to improve the integrity of dark order block trading are provided.
1 . A 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;
receiving, via at least one network, one or more firm limit orders from one or more market participants;
preventing 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;
storing, in the order book, a second portion of the one or more firm limit orders to form stored orders;
screening, 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;
removing, from the order book, the ineligible stored orders;
sorting the eligible stored orders remaining in the order book according to at least one predetermined parameter; and
executing, from the order book, the sorted eligible stored orders.
2 . The method of claim 1 , wherein the at least one predetermined market condition comprises a predetermined level of liquidity associated with the market data.
3 . The method of claim 2 , wherein the predetermined level of liquidity is associated with bid and ask prices of the market data.
4 . The method of claim 1 , wherein the online auction is initiated solely responsive to the at least one predetermined market condition.
5 . The method of claim 1 , wherein the online auction is initiated with no auction initiation request.
6 . The method 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 method 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 method of claim 1 , wherein the ineligible stored orders have a price that is higher than the reference price.
9 . The method of claim 1 , wherein the ineligible stored orders have a price that is lower than the reference price.
10 . The method of claim 1 , wherein the reference price is calculated from the monitored market data received during the duration of the online auction.
11 . The method 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 method of claim 1 , wherein the duration of the online auction is unknown to the one or more market participants.
13 . The method of claim 1 , further comprising:
determining, via a randomized timer, a randomized time for the duration of the online auction.
14 . The method of claim 1 , further comprising:
transmitting 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 method of claim 1 , wherein the at least one predetermined parameter comprises one or more of the order size and an order time.
16 . The method of claim 1 , further comprising:
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 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 method of claim 16 , further comprising:
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.
18 . The method 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 method 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 method 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 method of claim 16 , further comprising:
calculating a number of firm limit orders eligible to receive a fill on the heavy-side.
22 . The method 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 method 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 method 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 method 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.
26 . A non-transitory computer-readable storage medium storing instructions that, when executed by a processor, cause the processor to perform the functions 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;
receiving, via at least one network, one or more firm limit orders from one or more market participants;
preventing 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;
storing, in the order book, a second portion of the one or more firm limit orders to form stored orders;
screening, 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;
removing, from the order book, the ineligible stored orders;
sorting the eligible stored orders remaining in the order book according to at least one predetermined parameter; and
executing, from the order book, the sorted eligible stored orders.
27 . The non-transitory computer-readable storage medium of claim 26 , wherein the online auction is initiated with no auction initiation request.
28 . The non-transitory computer-readable storage medium of claim 26 , wherein the one or more firm limit orders comprise a dark order, the dark order not being visible to a broader market.
29 . The non-transitory computer-readable storage medium of claim 26 , wherein the functions further comprise:
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 26 , wherein the functions further comprise:
transmitting 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.