Systems and Methods for Matching One or More Incoming Order to a Standing Order as a Function of an Inner Market Parameter

Abstract

A method of order allocation is disclosed. The method includes receiving an incoming order, establishing an inner market representing a first portion of an order book which may be defined as a function of an inner market parameter, designating the first portion of the order book as a priority and allocating the first portion of the received incoming order based on the priority, establishing an outer market that represents a second portion of the order book that includes the remainder of the order book not represented by the inner market of the order book, assigning the received incoming order to one of the inner or outer markets as a function of the inner market parameter, allocating a first portion of the incoming order to the inner market utilizing a first-in, first-out (FIFO) algorithm, and allocating a second portion, in excess of the first portion, of the incoming order to the outer market using a pro-rata algorithm.

1 . (canceled) 
     
     
         2 . A method comprising:
 calculating a market parameter value according to a current dynamic market specification;   defining an inner market based on the market parameter value;   defining an outer market based on the market parameter value;   receiving an incoming order associated with a quantity and a price;   comparing the price to the market parameter;   assigning, via a processor, the incoming order to the inner market when the price is within a predetermined range set by the market parameter value to a market price; and   assigning, via the processor, the incoming order to the outer market when the price is outside of the predetermined range to the market price.   
     
     
         3 . The method of  claim 2 , further comprising:
 allocating a first portion of the quantity of the incoming order to the inner market utilizing a first-in, first-out (FIFO) algorithm; and   allocating a second portion of the quantity of the incoming order, in excess of the first portion, to the outer market using a pro-rata algorithm.   
     
     
         4 . The method of  claim 2 , wherein the current dynamic market specification is a volatility of the market. 
     
     
         5 . The method of  claim 4 , wherein the market parameter value is in increased as the market is more volatile. 
     
     
         6 . The method of  claim 4 , wherein the market parameter value is in decreased as the market is less volatile. 
     
     
         7 . The method of  claim 2 , wherein the current dynamic market specification is a function of a number of highest orders currently resting in an order book. 
     
     
         8 . The method of  claim 2 , wherein the predetermined range is a number of ticks configured to change over time according to market conditions. 
     
     
         9 . The method of  claim 8 , wherein the number of ticks is five. 
     
     
         10 . The method of  claim 2 , further comprising:
 allocating a first portion of the incoming order to the inner market utilizing a first algorithm; and   allocating a second portion of the incoming order, in excess of the first portion, to the outer market utilizing a second pro-rata algorithm,   wherein the quantity of the incoming order is equal to the first portion plus the second portion.   
     
     
         11 . The method of  claim 2 , wherein the incoming order is an option contract or a futures contract. 
     
     
         12 . An apparatus comprising:
 a memory configured to store computer readable instructions;   a processor in communication with the memory, the processor configured to execute the computer readable instructions, wherein the computer readable instructions are programmed to:   calculate a market parameter value according to a current dynamic market specification;   define an inner market and an outer market;   receive an incoming order associated with a price; and   select the inner market or the outer market based on a comparison of the price to the market parameter value.   
     
     
         13 . The apparatus of  claim 12 , wherein the instructions are further programmed to:
 assign, via a processor, at least a portion of the incoming order to the inner market when the price is within a predetermined range set by the market parameter value to a market price; and   assign, via the processor, at least a portion of the incoming order to the outer market when the price is outside of the predetermined range to the market price.   
     
     
         14 . The apparatus of  claim 12 , wherein the instructions are further programmed to:
 allocate a first portion of the incoming order to the inner market utilizing a first algorithm; and   allocate a second portion of the incoming order, in excess of the first portion, to the outer market utilizing a second pro-rata algorithm.   
     
     
         15 . The apparatus of  claim 14 , wherein the instructions are further programmed to:
 designate a portion of an order book as a priority and allocate the first portion of the incoming order based on the priority.   
     
     
         16 . The apparatus of  claim 15 , wherein the priority is maintained for a period of time. 
     
     
         17 . The apparatus of  claim 15 , wherein the priority is maintained until the inner market changes as a function of the market parameter value. 
     
     
         18 . A computer readable medium containing instructions that when executed perform a computer implemented method comprising:
 calculating a market parameter value according to a current dynamic market specification;   defining an inner market based on the market parameter value;   defining an outer market based on the market parameter value;   receiving an incoming order associated with a quantity and a price;   comparing the price to the market parameter;   assigning, via a processor, the incoming order to the inner market when the price is within a predetermined range set by the market parameter value to a market price; and   assigning, via the processor, the incoming order to the outer market when the price is outside of the predetermined range to the market price.   
     
     
         19 . The computer readable medium of  claim 18 , the method further comprising:
 allocating a first portion of the incoming order to the inner market utilizing a first-in, first-out (FIFO) algorithm; and   allocating a second portion of the incoming order, in excess of the first portion, to the outer market using a pro-rata algorithm.   
     
     
         20 . The computer readable medium of  claim 18 , the method further comprising:
 allocating a first portion of the incoming order to the inner market utilizing a first algorithm; and   allocating a second portion of the incoming order, in excess of the first portion, of the incoming order to the outer market utilizing a second pro-rata algorithm.   
     
     
         21 . The computer readable medium of  claim 18 , wherein the current dynamic market specification is a volatility of the market.