Classifications

• • G—PHYSICS
  • G06—COMPUTING; CALCULATING OR COUNTING
  • G06Q—INFORMATION AND COMMUNICATION TECHNOLOGY [ICT] SPECIALLY ADAPTED FOR ADMINISTRATIVE, COMMERCIAL, FINANCIAL, MANAGERIAL OR SUPERVISORY PURPOSES; SYSTEMS OR METHODS SPECIALLY ADAPTED FOR ADMINISTRATIVE, COMMERCIAL, FINANCIAL, MANAGERIAL OR SUPERVISORY PURPOSES, NOT OTHERWISE PROVIDED FOR
  • G06Q40/00—Finance; Insurance; Tax strategies; Processing of corporate or income taxes
  • G06Q40/04—Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange
• • G—PHYSICS
  • G06—COMPUTING; CALCULATING OR COUNTING
  • G06Q—INFORMATION AND COMMUNICATION TECHNOLOGY [ICT] SPECIALLY ADAPTED FOR ADMINISTRATIVE, COMMERCIAL, FINANCIAL, MANAGERIAL OR SUPERVISORY PURPOSES; SYSTEMS OR METHODS SPECIALLY ADAPTED FOR ADMINISTRATIVE, COMMERCIAL, FINANCIAL, MANAGERIAL OR SUPERVISORY PURPOSES, NOT OTHERWISE PROVIDED FOR
  • G06Q30/00—Commerce
  • G06Q30/06—Buying, selling or leasing transactions
  • G06Q30/0601—Electronic shopping [e-shopping]
• • G—PHYSICS
  • G06—COMPUTING; CALCULATING OR COUNTING
  • G06Q—INFORMATION AND COMMUNICATION TECHNOLOGY [ICT] SPECIALLY ADAPTED FOR ADMINISTRATIVE, COMMERCIAL, FINANCIAL, MANAGERIAL OR SUPERVISORY PURPOSES; SYSTEMS OR METHODS SPECIALLY ADAPTED FOR ADMINISTRATIVE, COMMERCIAL, FINANCIAL, MANAGERIAL OR SUPERVISORY PURPOSES, NOT OTHERWISE PROVIDED FOR
  • G06Q30/00—Commerce
  • G06Q30/06—Buying, selling or leasing transactions
  • G06Q30/0601—Electronic shopping [e-shopping]
  • G06Q30/0633—Lists, e.g. purchase orders, compilation or processing
• • G—PHYSICS
  • G06—COMPUTING; CALCULATING OR COUNTING
  • G06Q—INFORMATION AND COMMUNICATION TECHNOLOGY [ICT] SPECIALLY ADAPTED FOR ADMINISTRATIVE, COMMERCIAL, FINANCIAL, MANAGERIAL OR SUPERVISORY PURPOSES; SYSTEMS OR METHODS SPECIALLY ADAPTED FOR ADMINISTRATIVE, COMMERCIAL, FINANCIAL, MANAGERIAL OR SUPERVISORY PURPOSES, NOT OTHERWISE PROVIDED FOR
  • G06Q30/00—Commerce
  • G06Q30/06—Buying, selling or leasing transactions
  • G06Q30/0601—Electronic shopping [e-shopping]
  • G06Q30/0633—Lists, e.g. purchase orders, compilation or processing
  • G06Q30/0635—Processing of requisition or of purchase orders
• • H—ELECTRICITY
  • H04—ELECTRIC COMMUNICATION TECHNIQUE
  • H04W—WIRELESS COMMUNICATION NETWORKS
  • H04W4/00—Services specially adapted for wireless communication networks; Facilities therefor
  • H04W4/12—Messaging; Mailboxes; Announcements

Definitions

• the present invention relates in general to the field of computer systems, and in particular to a novel computer system for facilitating block trade securities transactions.
• Block trading also referred to as "crossing,” is a well-known type of securities transaction wherein trades are privately negotiated apart from the public auction market. Block trading allows sell side traders and buy-side traders to reduce transaction costs, such as ticket, execution and settlement costs. While block trading is most often performed through manual negotiation, several matching engines and alternative trading systems have been known in the prior art for matching securities buyers with sellers and for matching securities sellers with pools of liquidity.
• Some such matching engines previously known as rnstinet, VT and CBX (the “Instinet Systems"), provided by rnstinet, allow users to submit anonymous orders.
• the systems distribute order alerts to other users of the system who may have interest in performing a transaction with the user whose order triggered the order alerts.
• order alerts are distributed and negotiated upon between parties, the parties are anonymous to each other.
• order alerts allow parties to seek a natural counterpart to trade with while controlling information leakage and protecting trading strategy.
• Instinet Systems and other matching engines which provide for block trading are limited in several respects. While they have provided a means for continuous off- exchange crossing, they have not provided a sufficient capability to submit orders using market peg benchmarks or future price cross benchmarks via a web based terminal application. While such systems have provided a means for transmitting alerts to subscribers to advise them of potential trading opportunities, no means has existed for permitting the user to control which users or types of users will receive such alerts. Additionally, systems that provide for block trading have typically provided only limited means for negotiation between the parties, and such negotiations were only available to customers utilizing proprietary trading platforms on a proprietary data network.
• the invention provides an anonymous block trade matching system which allows users that wish to cross large blocks of stock to submit orders, or indications of interest, with the option of utilizing market peg benchmarks or future price cross benchmarks.
• Orders submitted may be subject to minimum size thresholds.
• an alert is generated to provide the order data to other users with potential to cross the order.
• Visibility of order data by other users may be restricted based upon a data interaction group to which the ordering user or the other user belongs.
• the system may provide users viewing order data with a capability of negotiating with the submitting user via a restricted two-way messaging interface.
• Flat rate and rebate/fee cost models may be utilized as a means for charging a user for access to the system.
• the invention therefore provides a mutually beneficial trading solution where both trade parties can benefit from trading directly with a natural counterpart.
• FIG. 1 shows a schematic block diagram illustrating a system in accordance with an embodiment of the invention.
• FIG. 2a shows a graphical illustration of an interface by which the system receives an order in accordance with one embodiment.
• FIG. 2b shows a graphical illustration of an interface by which the system receives an order in accordance with an embodiment.
• FIG. 3 is a high-level functional flow diagram illustrating a process for generating and distributing alerts.
• FIG. 4 shows a graphical illustration of a web application interface in accordance with one embodiment.
• FIG. 5 shows a graphical illustration of a two-way messaging system interface.
• FIG. 6 shows a graphical illustration of a search window in accordance with one embodiment of the invention.
• each block of the block diagrams or operational illustrations, and combinations of blocks in the block diagrams or operational illustrations may be implemented by means of analog or digital hardware and computer program instructions.
• These computer program instructions may be provided to a processor of a general purpose computer, special purpose computer, ASIC, or other programmable data processing apparatus, such that the instructions, which execute via the processor of the computer or other programmable data processing apparatus, implements the functions/acts specified in the block diagrams or operational block or blocks.
• the functions/acts noted in the blocks may occur out of the order noted in the operational illustrations. For example, two blocks shown in succession may in fact be executed substantially concurrently or the blocks may sometimes be executed in the reverse order, depending upon the functionality/acts involved.
• FIG. 1 illustrates an embodiment of the disclosed anonymous trade-matching system 10 for trading natural large blocks of stock across international or national markets.
• the system 10 provides users with the ability, during continuous trading hours, to submit orders for block trades.
• order data for the order may be included in a block match "alert", or "indication of interest (IOI)", which is selectively distributed to other users to alert such users to the opportunity to enter into a cross trade.
• IOI indication of interest
• a block matching engine 12 utilizes algorithms, discussed further below, to match orders.
• a core database 14 is provided for storing historical information regarding trades and tracking the trading history of clients.
• the core database is the generator of alerts.
• alerts may be generated by any server in the system without departing from the spirit and scope of the invention.
• Clients may access the trade -matching system 10 to place orders and/or receive alerts via an interface with an inhouse trading application 24 that communicates with an inhouse trading platform 16, via an interface with an external trading system 18 that communicates with inhouse trading platform 16, or via a web client 20 that connects via the internet with a web infrastructure server 22.
• the external trading system 18 may communicate with the trade -matching system 10 using a suitable standard or proprietary order protocol.
• a suitable protocol is the Financial Information eXchange (FIX) protocol published by FIX Protocol maintained by FIX Protocol Ltd of London, U.K.
• the FIX protocol is a well-known electronic communications protocol for international real-time exchange of information related to the securities transactions and markets.
• FIX messages are formed from a number of fields, each field is a tag value pairing that is separated from the next field by a delimiter SOH.
• the TAG is a string representation of an integer that indicates the meaning of the field. The value is an array of bytes that hold a specific meaning for the particular TAG.
• TAG 48 is securityID and is a string that identifies the security
• IDSource is an integer that indicates the identifier class being used.
• fields can be encrypted and thus the value can be pure binary and include the normal delimiter SOH - binary fields are always preceded by a length field.
• the FIX protocol defines meanings for most TAGs and a range of TAGs is reserved for private use between consenting parties.
• the FIX protocol also defines sets of fields that make up a particular message. Within the set of fields some are mandatory under the protocol and others are optional.
• the web infrastructure server 22 provides a secure interface to web clients accessing the system over the internet, and sets user level permissions.
• the web client 20 runs an internet- delivered web application that allows users to view trading opportunities in the form of "alerts," which are discussed in further detail below.
• the web application may additionally provide the user with an ability to set up filters to prevent their receipt of an overwhelming number of alerts for market sectors in which such user is not interested.
• the web application may also include instant messaging functionality for allowing clients to communicate with each other using permitted phrases in furtherance of negotiating a trade, as is discussed in further detail below.
• the Web application may further incorporate an advanced search screen that allows users to input criteria of their choice to display orders that are placed with the system.
• the web application in one embodiment establishes a real time data feed from core database so that changes made in core database intraday will be reflected instantly in the web front end.
• the presentation of the data by the web application may be accomplished by configuring it to display four types of windows: a stock list window displaying an order-by-order list of live, traded, cancelled and expired orders on the system; a market depth window showing consolidated data by price for live, traded, cancelled and expired orders, an alert window displaying IOI's relating to orders placed in the system, and a two-way message window used for negotiating with participants on existing orders, expired/cancelled orders and traded orders.
• FIGS. 2a and 2b show graphical illustrations of an interface by which the system receives a securities order in accordance with one embodiment.
• Current market data for a security is displayed in the top third of the interface.
• In the center of the interface is a series of fields with selection options.
• a "Quantity” field allows the user to specify a quantity associated with the order.
• a "Display Quantity” field provides a combo control to allow a user to specify display quantity, subject to minimum display criteria, with the option to select system values using a drop down.
• Such system values may be, e.g., "1000,” “2000,” “3000,” “4000,” “5000,” “10000,” “15000,” “20000,” or “25000.”
• the default value may be set as “All”, in which case the entire order will be displayed.
• An "Expiry” field provides a combo control to allow a user to specify an expiry time for the order. Users can access a list of system values using the drop down.
• Such system values may be, e.g., “Day,” “GTD,” “Blotter,” “+5 mins,” “+10 mins,” “+ 1 hr,” or “IOC.”
• the default value required may be set to "Day”.
• the order screen of FIGS. 2a and 2b in one embodiment includes a "Display Price" field which prompts the user to select a benchmark in connection with the order.
• Orders may be submitted using, e.g., market peg benchmarks 'Mid', 'Bid' and 'Ask', and future price cross benchmarks 'VWAP', 'Open' and 'Close'.
• the system provides the option of adding a hard limit to the order.
• a primary peg benchmark e.g., 'Mid', 'Bid' or 'Ask
• the system provides the option of adding a hard limit to the order.
• the primary peg benchmark price moves as the market moves, but the user is ultimately protected by their hard limit should the market move beyond their upper limit price.
• the order will be displayed using the alphabetic peg benchmark value, e.g., MID, and not the actual price value.
• the order type will change to a hard limit order automatically and will then display the hard limit price in numeric format. If the market moves favorably again, the order will again revert to an alphabetic value.
• trades will be issued at the primary price of the specified benchmark at the time the match occurred.
• a primary future cross price benchmark value e.g. 'VWAP', 'Open' or 'Close'
• a hard limit e.g. 'VWAP', 'Open' or 'Close'
• the order will be set at the chosen benchmark, and upon finding a match ⁇ a person entering an order for opposite side at same benchmark value ⁇ an indicative fill will be sent to both participants at the primary market last close price.
• the Primary Exchange publishes its official price that the user specified as their future cross benchmark, trade corrects will be sent to both participants at the official cross price.
• the system may be configured to require a user entering an order to adhere to one or more minimum thresholds, on a per-stock basis, in order to participate in the block matching functions provided by the system.
• thresholds include a "% ADV" threshold and a Share Quantity threshold.
• % ADV % ADV
• Share Quantity an order must be 'X' number of shares. If an order not meeting a required threshold is entered in the system, it may be rejected by the system.
• Thresholds for a particular stock ordered may be set at any value, but will generally be based on liquidity of the stock and price level of the stock ordered.
• the system may further be configured to provide users with the facility to include their order data on block match alerts, or indications of interest (IOI's), maximizing the potential to find a suitable party to cross with.
• the system in various embodiments segregates users into four distinct data interaction groups, and makes order data visible to users in accordance with the group to which they belong. In one embodiment, the four groupings are: Buy Side, Sell Side, Market Maker and Dark Provider. The constituency of these groups, and the extent to which they are able to view orders in the system, is summarized in the table below:
• FIG. 3 is a high-level functional flow diagram illustrating a process for generating and distributing alerts.
• the process begins at step 310 with the receipt of a firm order in the system. Users must enter a firm order into the block matching system in order to trigger an alert/IOI.
• the order data is first sent to the core database at step 312.
• the order data is examined to determine if the user placing the order has designated himself as a dark provider. Dark Providers will never see any order data for orders placed in the block matching system, but instead are able to interact with orders as a blind participant. Their orders are not visible to any of the participating groups. Thus, if the user placing the order is a dark provider, no alert is generated and the alert generation process is stopped at step 316.
• step 318 the order data is examined to determine whether the user has added a "hidden” instruction to the order. If a user adds a "Hidden” instruction when placing an order, the order will not be displayed in the order book and no alert will be generated.
• the process proceeds to generate an alert at step 322.
• the content of such alert is discussed below with reference to FIG. 4.
• the order data is then examined to determine whether the user has included therein a sell side instruction.
• orders placed in the system are only visible to buy side users by default. Buy side users, however, have the option to make their orders visible to the sell side/makers makers by adding a "sell side" instruction to their order.
• Such sell side instruction may be indicated at the time of the order, e.g., by checking a "sell side" box shown in FIGS. 2a and 2b.
• Such instruction may be set automatically by the system in accordance with a user's user profile.
• Sell side users are able to enter orders into the system, but their orders will always be visible to the Buy Side. They are, however, able to hide orders from other sell side/market maker users by not adding the 'Sell Side' instruction to their order.
• a particular client may be assigned a "tier.”
• the system may be configured to provide higher tiered clients, e.g., those with a higher volume of trades historically, with alerts in advance of lower tiered clients.
• the system is configured to transmit alerts to tier one users one minute ahead of tier two users.
• the system may be configured to require users to have met a preset minimum volume of trades within a specified time period to be eligible for tier one alerts. For example, users may be required to have traded on the system at least once in the last week. Alert subscriptions are checked by the system when a new order is placed in the system to determine which users will receive the alert first.
• the system may be configured such that tier one alerts are only available through inhouse front ends, and all external alert subscribers are assigned to tier two.
• FIG. 4 shows a graphical illustration showing an example of a web application interface, including an alert window, a stock list window, and a negotiation window, in accordance with one embodiment.
• the alert window displays alerts/IOIs for orders as and when they placed in the system, subject to the user's tier target level and client group (e.g., buy side, sell side, or dark provider) visibility.
• the window may be set as a permanent display window by default. However, the system may be configured to provide users with the ability to right click, for example, on the window and select 'set as pop-up window' if they prefer the window to open upon receipt of a new alert.
• the alert window displays the Stock, Side and Qty for each new alert/IOI.
• the system may be configured to cause an alert/IOI to expire and be cleared from the alert window after a predetermined period of time, e.g., two minutes.
• a stock list window may be provided in the web application interface for viewing and interacting with current and historical order data.
• the interface allows users who have a subscription to view order data for orders placed in the system to see live orders as well as traded, cancelled and expired order history over a specified amount of time, e.g., over the last thirty days.
• Each order may be presented on a separate line, with lines sorted such that live orders appear at the top, sorted by date and time, followed by traded, cancelled, and expired order history, which are each also sorted by date and time.
• the system may be configured such that when a new live order is added to the system for a stock that is displayed in a user's stock list window, the line for the order is displayed in a distinct colour which gradually fades over a period of time, e.g., two minutes, to reveal the underlying row colour for the order.
• FIG. 5 shows a graphical illustration of a two-way messaging system interface.
• the two-way messaging system may be provided as a real-time messaging system, e.g., instant messaging, or may be provided as a non-real-time messaging system such as an e-mail system.
• the two-way messaging system may be provided as part of the web application running on web client 20 (FIG. 1).
• Users can use the two-way messaging interface of FIG. 5 to target an order of interest and strike up a restricted message with the owner of the historic order using predetermined hard- coded phrases permitted by the system through restricted keystrokes or button presses.
• Keyboard stickers may be provided to users to associate particular keys with particular permitted phrases.
• the "S" key may be associated with the phrase "Sorry not at present” and the "W” key may be associated with the phrase "Will you deal at.”
• the hard-coded phrases may similarly be implemented in the form of a series of phrases associated with a corresponding series of soft buttons appearing on the interface of FIG. 5.
• the system limits the parties to communications using a finite number of phrases associated with a finite number of corresponding buttons, as well as the number keys on the user's keyboard. Numeric keys are preferably not restricted.
• the negotiation window of FIG. 5 depicts a negotiation between two participants.
• the first participant has sent a message 'will you deal at 22.75?' to the owner of order WTB. L, Sell, 1,000,000.
• the order owner is about to respond with 'Sorry not at present'.
• FIG. 6 shows an example of an advanced search window in accordance with one embodiment of the invention that allows a user to input criteria of their choice to display orders that have been placed with the system.
• a user Once logged in to the web application, a user is presented with the search window. The user can utilize this window to build queries on an ad hoc basis, or he can set up his preferred search criteria and save the query so that on subsequent log ins all that is required of him is to select the query name and select a "Go" button or similar control.
• a "Symbol” fields provides a means for a user to identify a specific stock, to identify multiple stocks using a comma separator, or select one or more stocks from a list.
• a "Symbol Type” field allows the user to identify the type of symbol entered in the Symbol field, e.g., "rnstinet Symbol,” “RIC,” Cusip,” “Sedol” and references to third party vendor products, such as Bloomberg.
• An “Exclude Alerts” field provides the user with the capability of excluding from the search results those orders for which an alert has been generated.
• a “Side” field provides a drop-down list allowing a user to limit the search to either buy-side or sell-side orders.
• An "Order Type” field allows the user to limit the search to orders that are either live, traded, cancelled or expired.
• a "Quantity” field provides a means for the user to specify a range, e.g., 10,000-20,000.
• An “Instrument Type” field allows the user to specify a type of instrument to search for, e.g., UKE, ITE, USE, USEO, or CAE.
• a "Market” field allows the user to restrict his search to a particular market, e.g., U.K. or U.S.
• a "Region” field similarly allows the user to restrict his search to a particular region, e.g., Europe, US, or Asia, or to multiple regions using a comma separator.
• a “Currency” field allows the user to restrict the search to orders in a particular currency, e.g., GBP, GBp, USD, JPY, HKD, EUR, CHE, NOK, DKK, ZAR, or All.
• a “% ADV” field allows the user to specify a range, e.g., between 5% and 200%, for the percentage of order quantity that is for the specified stock.
• An “Include Hidden” field allows the user to include in the search results orders which were placed with the "Hidden” instruction discussed above.
• a “Search BlockMatch” button causes the query to execute with the above criteria, and returns a list of orders in the system that matches such criteria.
• the system may be configured to provide users with a mutually beneficial cost model for two parties that wish to cross large blocks of stock off-exchange.
• the system may provide two cost model options for users ⁇ a flat rate cost model and a rebate/fee cost model.
• the flat rate cost model option offers users who want a flat rate cost model with access to the system at a flat rate cost per trade, e.g., 2.5bp per trade on DMA orders or orders placed with the system through a representative of the system proprietor. Orders that are placed with the system using one of several value-adding algorithms that automate the accessing of liquidity may be offered at another, higher flat rate, e.g., 3 or 4bp.
• the rebate/fee cost model option provides users with the ability to conduct a transaction where the buying supplier gets a net price of, e.g., 10 minus 2.5bp and the seller gets a net price of, e.g., 10 minus 7.5bp.
• the rebate/fee model is configured to automatically calculate client trades as a fee or rebate on a per-trade basis based on which client was the provider or taker of liquidity.
• the system can be configured to allow all trades to be processed under a flat rate model and then at the end of the day or month manually override each rate with the new rate after all rebates/fees have been taken into account.
• the system may be configured to offer participants that post directly to it the ability to 'take liquidity' at a flat rate, e.g. 7.5bp, while 'liquidity providers' benefit from a rebate, e.g. 2.5b, on orders.
• the system may be further configured such that participants that trade roughly an equal proportion of posting and taking liquidity can access the system at a flat rate, such as the mid point of the gross commission, for direct posting and taking liquidity, e.g. 2.5bp, on all trades.

Landscapes

• Business, Economics & Management (AREA)
• Accounting & Taxation (AREA)
• Finance (AREA)
• Engineering & Computer Science (AREA)
• Theoretical Computer Science (AREA)
• Economics (AREA)
• Marketing (AREA)
• Strategic Management (AREA)
• Physics & Mathematics (AREA)
• General Business, Economics & Management (AREA)
• General Physics & Mathematics (AREA)
• Development Economics (AREA)
• Technology Law (AREA)
• Computer Networks & Wireless Communication (AREA)
• Signal Processing (AREA)
• Financial Or Insurance-Related Operations Such As Payment And Settlement (AREA)
• Management, Administration, Business Operations System, And Electronic Commerce (AREA)

Applications Claiming Priority (1)

Publications (1)

Family

ID=38799334

Family Applications (1)

Country Status (5)

Families Citing this family (8)

Family Cites Families (7)

• 2007
  • 2007-05-01 KR KR1020157018769A patent/KR20150102044A/ko not_active Application Discontinuation
  • 2007-05-01 DE DE112007003476T patent/DE112007003476T5/de not_active Ceased
  • 2007-05-01 KR KR1020177002266A patent/KR102035117B1/ko active IP Right Grant
  • 2007-05-01 GB GB0918290A patent/GB2463996A/en not_active Withdrawn
  • 2007-05-01 EP EP07733648A patent/EP2143060A1/en not_active Ceased
  • 2007-05-01 WO PCT/GB2007/050227 patent/WO2008132420A1/en active Application Filing
  • 2007-05-01 KR KR1020087008562A patent/KR100949652B1/ko active IP Right Grant

Non-Patent Citations (2)

Also Published As

Similar Documents

Legal Events