Hybrid trading system for concurrently trading through both electronic and open-outcry trading mechanisms

Abstract

A system and method of allocating orders in an exchange configured for trading by a combination of electronic and open-outcry trading mechanisms is provided. One method includes permitting multiple quotes to be disseminated to the market, and providing market making rights of varying degrees to entities having a physical presence on the floor of the exchange and entities remotely located away from the trading floor. The system includes a trade engine configured for receiving orders from market makers on and away from the trading floor. The system also includes executable instructions for allocating to designated primary market makers a portion of an incoming order remaining after first trading against public customer orders.

1 .- 17 . (canceled) 
   
   
       18 . An automated exchange system for the purchase or sale of securities or derivatives in an exchange configured for trading securities or derivatives comprising:
 an electronic trade engine configured for receiving incoming orders generated by an market participant physically present at an open-outcry trading floor of an exchange or at a location remote to the open-outcry trading floor of the exchange;   an electronic book configured for storing the incoming orders received by the electronic trade engine;   a database comprising an allocation algorithm, the database in communication with the electronic trade engine; and   a trade processor in communication with the database for analyzing and executing orders according to an allocation algorithm selected from the database, the trade processor comprising:   a first set of instructions for determining a total number of market participants physically present at the open-outcry trading floor of an exchange and at a location remote to the open-outcry trading floor of the exchange at a matching price of an incoming electronic order;   a second set of instructions for determining a collective allocation percentage for market participants based on the total number of market participants located at the open-outcry trading floor of the exchange, and at locations remote to the open-outcry trading floor, at the matching price according to the relation:   
     
       
         
           
             
               allocation 
                
               
                   
               
                
               percentage 
             
             = 
             
                 
               
                 [ 
                 
                   
                     
                       1 
                       
                         number 
                          
                         
                             
                         
                          
                         of 
                          
                         
                             
                         
                          
                         participants 
                       
                     
                     + 
                     
                       
                         participant 
                          
                         
                             
                         
                          
                         quote 
                          
                         
                             
                         
                          
                         size 
                       
                       
                         ∑ 
                         
                           participant 
                            
                           
                               
                           
                            
                           quote 
                            
                           
                               
                           
                            
                           sizes 
                         
                       
                     
                   
                   2 
                 
                 ] 
               
             
           
         
       
       and 
       a third set of instructions for allocating, among the market participants located at the open-outcry trading floor of the exchange, and at locations remote to the open-outcry trading floor, a portion of the incoming electronic order remaining after execution against any public customer orders based on the collective allocation percentage. 
     
   
   
       19 . The automated exchange system of  claim 18 , wherein the third set of instructions further comprises instructions for multiplying the portion by the collective allocation percentage and then dividing a result by a total number of designated primary market makers. 
   
   
       20 . The automated exchange system according to  claim 18 , wherein the third set of instructions further comprises multiplying the remainder allocated to a remote market maker by a fixed percentage. 
   
   
       21 . The method according to  claim 19 , wherein the remainder is further divided equally among remote market makers at the price matching the incoming electronic order.