Automated batch auctions in conjunction with continuous financial markets

Abstract

A method and system for performing a batch auction whereby a series of orders, according to a variety of predetermined order types, are generated by qualified market participants and communicated to an auction system. The auction system takes into account each order and its impact upon relative supply and demand to determine by a preset algorithm a price and share transaction quantity. Trades are executed at the price, and a portion of the transaction quantity is allocated to each investor on a fair basis dependent upon their initial orders. In embodiments of the present invention, the auction system uses a computer system or network designed to automatically perform one or more steps of the above method. Such a system is preferably connected to one or more ECNs such that non-executed shares can be automatically sent to outside sources for execution. In alternative embodiments, the invention includes the use of a one or more intermediaries or market makers to cover certain unexecuted trades at the determined price. The present invention is preferably used to conduct batch auctions at the opening and closing of securities trading markets.

What is claimed is: 
     
         1 . A computerized system for performing a batch auction of a security, comprising:
 a computerized network having one or more computers in electronic communication with each other;   computer facilities configured to receive a plurality of messages containing orders from one or more qualified participants, and to accept those orders that meet certain predetermined criteria;   an order book database located on one or more of said computers, wherein said order book database communicates with said order receiving program and stores each of said accepted orders received by said receiving program;   computer facilities configured to calculate an optimal price upon which to transact a maximum number of shares of the security during the batch auction based upon the order book in said order boob database;   computer facilities configured to execute the batch auction of said maximum number of shares of the security at a given execution time, and to allocate said maximum number of shares of the security among said accepted orders according to a predetermined criterion; and   computer facilities configured to publish a predetermined selection of data from said order book database, and wherein said notification program notifies said qualified participants of results of said auction execution program.   
     
     
         2 . The computerized system for performing a batch auction of a security according to  claim 1 , wherein said predetermined selection of data published by said price notification program comprises an indicated price and net order imbalance. 
     
     
         3 . The computerized system for performing a batch auction of a security according to  claim 1 , wherein said messages can contain order types selected from the group consisting of unpriced orders, priced orders, and cross orders. 
     
     
         4 . The computerized system for performing a batch auction of a security according to  claim 1 , further comprising an electronic connection for forwarding unexecuted orders to outside markets. 
     
     
         5 . The computerized system for performing a batch auction of a security according to  claim 1 , further comprising communication connections whereby said qualified participants may remotely submit said messages to said order receiving program electronically.