System and Method for Monitoring Trades Outside of a No-Bust Range in an Electronic Trading System

Abstract

An alert system that notifies an Exchange's staff of a trade appearing to be outside an expected market range of prices includes determination logic which derives, based on data received from an input device, a theoretical no-bust range of prices, i.e. prices above and below a synthesized market price, within which an erroneous trade cannot be cancelled. Evaluation logic monitors trades and compares them to the theoretical no-bust range of prices. Alert logic notifies the Exchange's staff when the evaluation logic identifies a potentially erroneous trade that lies outside the theoretical no-bust range of prices. A method of notifying the Exchange of a trade that potentially lies outside of an expected range of prices includes monitoring an input range of prices, deriving the theoretical no-bust range of prices, comparing transactions prices to the theoretical no-bust range of prices and notifying the Exchange when a potentially erroneous trade can be cancelled.

We claim: 
     
         1 . A computer implemented method for minimizing adverse effects of a trade executed in error, the method comprising:
 determining, by a processor, at least one characteristic indicative of an erroneous trade;   monitoring, by the processor, a plurality of trades;   automatically identifying, by the processor, any of the plurality of trades which comprises the at least one characteristic; and   acting, by the processor, on any of the plurality of trades identified as comprising the at least one characteristic.   
     
     
         2 . The computer implemented method of  claim 1  wherein the each of the plurality of trades is characterized by an associated price, the at least one characteristic comprising an associated price of a trade being outside of an expected range of prices. 
     
     
         3 . The computer implemented method of  claim 1  wherein the each of the plurality of trades is characterized by an associated price, the at least one characteristic comprising an associated price of a trade being outside of a predicted range of prices. 
     
     
         4 . The computer implemented method of  claim 1  wherein the each of the plurality of trades is characterized by an associated price, the at least one characteristic comprising an associated price of a trade being outside of a prevailing market range of prices. 
     
     
         5 . The computer implemented method of  claim 1  wherein the each of the plurality of trades comprises a trade of a contract and is characterized by an associated price, the at least one characteristic comprising an associated price of a trade being inconsistent with historical trades of the contract being traded. 
     
     
         6 . The computer implemented method of  claim 1  wherein the each of the plurality of trades comprises a trade of a contract for an underlying commodity and is characterized by an associated price, the at least one characteristic comprising an associated price of a trade being inconsistent with historical trades of the commodity underlying the contract being traded. 
     
     
         7 . The computer implemented method of  claim 1  wherein the each of the plurality of trades comprises a trade of a contract for an underlying commodity and is characterized by an associated price, the at least one characteristic comprising an associated price of a trade being inconsistent with a highly correlated investment. 
     
     
         8 . The computer implemented method of  claim 1  wherein the each of the plurality of trades comprises a trade of a contract and is characterized by an associated price, the at least one characteristic comprising an associated price of a trade being inconsistent with a fair market value of the contract being traded. 
     
     
         9 . The computer implemented method of  claim 1  further comprising ignoring, by the processor, any of the identified plurality of trades which would not cause significant adverse effects. 
     
     
         10 . The computer implemented method of  claim 9  wherein each of the plurality of trades is characterized by an associated price, the ignoring further comprising ignoring any of the identified trades whose associated price is within a defined price range. 
     
     
         11 . The computer implemented method of  claim 10  further comprising calculating the defined price range wherein a trade having an associated price therein is ignored. 
     
     
         12 . The computer implemented method of  claim 10  wherein the defined range is variable. 
     
     
         13 . The computer implemented method of  claim 10  wherein the defined range is asymmetrical with respect to a synthetic market price. 
     
     
         14 . The computer implemented method of  claim 1  wherein the acting further comprises cancelling the identified trades. 
     
     
         15 . The computer implemented method of  claim 1  wherein the acting further comprises generating an alert based on the identified trades. 
     
     
         16 . A system which minimizes adverse effects of a trade executed in error, the system comprising:
 an evaluation logic comprising at least one processor operative to determine at least one characteristic indicative of an erroneous trade, monitor a plurality of trades, automatically identify any of the plurality of trades which comprises the at least one characteristic and act on any of the plurality of trades identified as comprising the at least one characteristic.   
     
     
         17 . The system of  claim 16  wherein the each of the plurality of trades is characterized by an associated price, the at least one characteristic comprising an associated price of a trade being outside of an expected range of prices. 
     
     
         18 . The system of  claim 16  wherein the each of the plurality of trades is characterized by an associated price, the at least one characteristic comprising an associated price of a trade being outside of a predicted range of prices. 
     
     
         19 . The system of  claim 16  wherein the each of the plurality of trades is characterized by an associated price, the at least one characteristic comprising an associated price of a trade being outside of a prevailing market range of prices. 
     
     
         20 . The system of  claim 16  wherein the each of the plurality of trades comprises a trade of a contract and is characterized by an associated price, the at least one characteristic comprising an associated price of a trade being inconsistent with historical trades of the contract being traded. 
     
     
         21 . The system of  claim 16  wherein the each of the plurality of trades comprises a trade of a contract for an underlying commodity and is characterized by an associated price, the at least one characteristic comprising an associated price of a trade being inconsistent with historical trades of the commodity underlying the contract being traded. 
     
     
         22 . The system of  claim 16  wherein the each of the plurality of trades comprises a trade of a contract for an underlying commodity and is characterized by an associated price, the at least one characteristic comprising an associated price of a trade being inconsistent with a highly correlated investment. 
     
     
         23 . The system of  claim 16  wherein the each of the plurality of trades comprises a trade of a contract and is characterized by an associated price, the at least one characteristic comprising an associated price of a trade being inconsistent with a fair market value of the contract being traded. 
     
     
         24 . The system of  claim 16  wherein the evaluation logic is further operative to ignore any of the identified plurality of trades which would not cause significant adverse effects. 
     
     
         25 . The system of  claim 24  wherein each of the plurality of trades is characterized by an associated price, the evaluation logic being further operative to ignore any of the identified trades whose associated price is within a defined price range. 
     
     
         26 . The system of  claim 25  wherein the evaluation logic is further operative to calculate the defined price range wherein a trade having an associated price therein is ignored. 
     
     
         27 . The system of  claim 25  wherein the defined range is variable. 
     
     
         28 . The system of  claim 25  wherein the defined range is asymmetrical with respect to a synthetic market price. 
     
     
         29 . The system of  claim 16  wherein the evaluation logic is further operative to cancel the identified trades. 
     
     
         30 . The system of  claim 16  wherein the evaluation logic is further operative to generate an alert based on the identified trades. 
     
     
         31 . A system which minimizes adverse effects of a trade executed in error, the system comprising:
 means for determining at least one characteristic indicative of an erroneous trade;   means for monitoring a plurality of trades;   means for automatically identifying any of the plurality of trades which comprises the at least one characteristic; and   means for acting on any of the plurality of trades identified as comprising the at least one characteristic.   
     
     
         32 . The system of  claim 31  further comprising means for ignoring any of the identified plurality of trades which would not cause significant adverse effects. 
     
     
         33 . The system of  claim 32  wherein each of the plurality of trades is characterized by an associated price, the means for ignoring further comprising means for ignoring any of the identified trades whose associated price is within a defined price range. 
     
     
         34 . The system of  claim 33  further comprising means for calculating the defined price range wherein a trade having an associated price therein is ignored. 
     
     
         35 . The system of  claim 33  wherein the defined range is variable. 
     
     
         36 . The system of  claim 33  wherein the defined range is asymmetrical with respect to a synthetic market price. 
     
     
         37 . The system of  claim 31  wherein the means for acting further comprises means for cancelling the identified trades. 
     
     
         38 . The system of  claim 31  wherein the means for acting further comprises means for generating an alert based on the identified trades.