Automated trading system for routing and matching orders

Abstract

An automated system for matching orders from a virtual trading crowd in an exchange configured for trading securities or derivatives is disclosed including an electronic trade engine operative to receive an order or a quote for a security or derivative at the exchange, the trade engine further operative to disseminate a request for a price message to a plurality of market makers quoting a class in response to receiving the order or the quote, an electronic book in communication with the electronic trade engine, the electronic book operative to store at least one order or quote received by the electronic trade engine, a database including an allocation algorithm, the database in communication with the electronic trade engine, and a trade processor in communication with the database, the trade processor operative to analyze and execute orders or quotes according to the allocation algorithm selected from the database.

1 . An automated system for matching orders from a virtual trading crowd in an exchange configured for trading securities or derivatives, the automated system comprising:
 for a security or derivative;   an electronic book, the electronic book operative to store at least one order or quote of a plurality of orders or quotes for a security or derivative received by the exchange;   a database comprising an allocation algorithm; and   a trade processor in communication with the electronic book and the database, the trade processor operative to automatically execute orders or quotes according to the allocation algorithm selected from the database, wherein the trade processor is further configured to, for any remaining portion of an order not fully executed according to the allocation algorithm:
 select a market maker guarantor from a market maker guarantor database; and 
 automatically execute the remaining portion against the selected market maker guarantor. 
   
     
     
         2 . The automated system of  claim 1 , wherein the trade processor is further configured to automatically execute the remaining portion against the market maker guarantor by executing the remaining portion at a price equal to a national best bid or offer price. 
     
     
         3 . The automated system of  claim 1 , wherein to automatically execute orders or quotes, when the exchange receives an order for the security or derivative while the exchange is currently at a price for the security or derivative that is different than a national best bid or offer price, the trade processor is further configured to: automatically transmit a request for price message to eligible market participants; and
 in response to receiving a price response from at least one eligible market participant at or better than the national best bid or offer price, generate a quote trigger for a predetermined period of time and allocate the order to the at least one eligible market participant, and any other eligible market participants responding to the quote trigger, for automatic execution according to the allocation algorithm selected.   
     
     
         4 . The automated system of  claim 1 , wherein the allocation algorithm selected from the database is a maker-taker allocation algorithm. 
     
     
         5 . (canceled) 
     
     
         6 . The automated system of  claim 1 , wherein the market maker guarantor database further comprises parameters on market maker guarantor execution guarantees. 
     
     
         7 . A method for matching orders to a virtual trading crowd in an exchange prior to automatically linking the order to an away market, the method comprising:
 receiving an order or quote for a security or derivative at the exchange, wherein the exchange comprises a price for the security or derivative that differs from a national best bid or offer price;   routing the order or quote to a trade engine; and   in a processor of the trade engine:
 disseminating a request for price message to a plurality of market makers quoting a class; 
 in response to receiving at least one response message:
 allocating at least a portion of the order or quote to at least one market maker according to an allocation algorithm; and 
 allocating a remaining portion of the order or quote, if any, to at least one predetermined market maker guarantor to execute the remaining portion of the order or quote at the national best bid or offer price. 
 
   
     
     
         8 . The method according to  claim 7 , wherein the request for price message comprises a price equal to the national best bid or offer price. 
     
     
         9 . The method according to  claim 8 , wherein the request for price message further comprises an order or quote size. 
     
     
         10 . The method according to  claim 7 , wherein allocating the remaining portion of the order or quote, if any, to the at least one predetermined market maker guarantor to execute the remaining portion of the order comprises the trade processor allocating and executing the remaining portion based on market maker guarantor execution parameters associated with the at least one predetermined market maker guarantor that are stored in a market maker guarantor database. 
     
     
         11 . The method according to  claim 7 , wherein the allocation algorithm comprises a maker-taker algorithm. 
     
     
         12 . The method of  claim 10 , wherein the market maker guarantor execution parameters comprise at least one of order or quote size, price, size of a displayed national best bid or offer, which exchanges are displaying the national best bid or offer, transaction costs, or a number of increments from an exchange best bid or offer. 
     
     
         13 . The method of  claim 10 , further comprising, if a size of the remaining portion of the order or quote is greater than an order size in the market maker guarantor parameter database representing an order size a particular market maker guarantor previously indicated a willingness to guarantee, preventing execution of the remaining portion against the particular market maker guarantor. 
     
     
         14 . The method of  claim 10 , further comprising, if a size of the remaining portion of the order or quote is greater than an order size in the market maker guarantor parameter database representing an order size a particular market maker guarantor previously indicated a willingness to guarantee, dividing the remaining portion among a plurality of market maker guarantors. 
     
     
         15 . The method of  claim 7 , wherein receiving at least one response message comprises receiving at least one response message within a predetermined period of time. 
     
     
         16 . The method of  claim 15 , further comprising:
 in absence of receiving at least one response within the predetermined period of time, routing the received order in its entirety to an away market.   
     
     
         17 . The automated system of  claim 6 , wherein the parameters on market maker guarantor execution guarantees comprise at least one of order or quote size, price, size of a displayed national best bid or offer, which exchanges are displaying the national best bid or offer, transaction costs, or a number of increments from an exchange best bid or offer. 
     
     
         18 . The automated system of  claim 17 , wherein the trade processor is further configured to:
 if a size of the remaining portion of the order or quote is greater than an order size in the market maker guarantor database representing an order size a particular market maker guarantor previously indicated a willingness to guarantee, prevent execution of the remaining portion against the particular market maker guarantor.   
     
     
         19 . The automated system of  claim 17 , wherein the trade processor is further configured to:
 if a size of the remaining portion of the order or quote is greater than an order size in the market maker guarantor database representing an order size a particular market maker guarantor previously indicated a willingness to guarantee, divide the remaining portion among a plurality of market maker guarantors.