System and method for trading financial instruments based on undisclosed values

Abstract

In electronic trading venues, there may be orders for which the full information is not publicly displayed. For example, the full quantity of an order available for trading or the most aggressive price at which an order can be traded may not be made public. A system and method are disclosed that facilitates trading based on this non-public information. A first order associated with a financial instrument is placed at a venue to probe for non-public information related to the financial instrument. The results of the probe may then be used to place a second order at the venue that takes advantage of any discovered non-public information.

What is claimed is: 
     
         1 . A method for facilitating electronic trading of a financial instrument by a system comprising at least one computer and at least one database comprising stored data relating to orders for the financial instrument in a plurality of electronic trading venues, the method comprising:
 (a) receiving, by the at least one computer, an initial order for the financial instrument, the initial order including a price and a quantity;   (b) determining, by the at least one computer, a price limit, based at least on the price of the initial order, for a price probe order for the financial instrument on a same side as the initial order;   (c) identifying, by the at least one computer, one or more trading venues of the plurality of electronic trading venues eligible to receive the price probe order based at least on the respective trading venue having at least one order for the financial instrument with a displayed price or quantity on an opposite side of the initial order;   (d) automatically creating, by the at least one computer, the price probe order for a first trading venue of the eligible electronic trading venues the price probe order comprising (i) a price within the determined price limit and different from displayed prices for all orders for the financial instrument in the first trading venue and (ii) a quantity less than the quantity of the initial order and at least equal to a minimum trade quantity for the first trading venue;   (e) automatically placing, by the at least one computer, the price probe order in the first trading venue;   (f) after execution of the price probe order for the entire quantity thereof, automatically creating, by the at least one computer, another order for the financial instrument on the same side as the initial order comprising (i) a price equal to the price of the price probe order and (ii) a quantity at least equal to the minimum trade quantity for the first trading venue and up to a remaining quantity of the initial order after execution of the price probe order; and   (g) automatically placing, by the at least one computer, the other order in the first trading venue.   
     
     
         2 . The method of  claim 1 , wherein:
 (h) if the other order is executed for less than the remaining quantity, repeating steps (f) and (g) for one or more respective other orders until any remaining quantity is less than the minimum trade quantity for the first trading venue or a trade is not executed.   
     
     
         3 . The method of  claim 1 , comprising:
 automatically creating, by the at least one computer, a price probe order for at least one other trading venue of the electronic eligible trading venues in addition to the first trading venue, the price probe order for each other trading venue comprising (i) a price within the determined price limit and different from displayed prices for all orders for the financial instrument in the respective other trading venue and (ii) a quantity up to a remaining quantity in the initial order after creation of a previous price probe order and at least equal to a minimum trade quantity for the respective other trading venue;   automatically placing, by the at least one computer, a respective price probe order created in the previous step in each other respective trading venue;   after execution of a respective price probe order placed in the previous step for the entire quantity thereof, automatically creating, by the at least one computer, a further order for the financial instrument on the same side as the initial order comprising (i) a price equal to the price of the respective executed price probe order and (ii) a quantity at least equal to the minimum trade quantity for the respective other trading venue and up to a remaining quantity of the initial order after execution of the respective price probe order; and   automatically placing, by the at least one computer, a respective further order in a respective other trading venue.   
     
     
         4 . The method of  claim 1 , comprising:
 (h) if the other order is executed for less than the remaining quantity, repeating steps (f) and (g) for one or more respective other orders until any remaining quantity is less than the minimum trade quantity for the first trading venue or a trade is not executed; then   (i) identifying, by the at least one computer, one or more second trading venues of the plurality of electronic trading venues in which a probe order was not placed and which is otherwise eligible to receive a quantity probe order based at least on the one or more second trading venues having at least one order for the financial instrument on the opposite side of the initial order with a displayed price and a displayed quantity;   (j) automatically creating, by the at least one computer, the quantity probe order for the financial instrument, the quantity probe order comprising (i) a price within the determined price limit and equal to the displayed price of the at least one order in a second trading venue and (ii) a quantity less than a remaining quantity of the initial order and more than the quantity of the at least one order;   (k) automatically placing, by the at least one computer, the quantity probe order in the second trading venue;   (l) after execution of the quantity probe order for the entire quantity thereof, automatically creating, by the at least one computer, a further order for the financial instrument on the same side as the initial order comprising (i) a price equal to the price of the quantity probe order and (ii) a quantity at least equal to the minimum trade quantity for the second trading venue and up to a remaining quantity of the initial order after execution of the quantity probe order; and   (m) automatically placing, by the at least one computer, the further order in the second trading venue.   
     
     
         5 . The method of  claim 4 , comprising:
 (n) if the further order is executed for less than the remaining quantity, repeating steps (l) and (m) until any remaining quantity is less than the minimum trade quantity for the second trading venue or a trade is not executed   
     
     
         6 . The method of  claim 1 , wherein the original order includes information characterizing the initial order as a pegged order and additional information relating thereto, or information characterizing the initial order as an order with discretion and additional information relating thereto, and wherein the step of determining the price limit comprises determining the price limit also based on such characterizing and additional information. 
     
     
         7 . The method of  claim 1 , wherein the quantity of the created price probe order is equal to the minimum trade quantity for the first trading venue. 
     
     
         8 . The method of  claim 1 , wherein the quantity of the other order is a predetermined quantity up to the remaining quantity. 
     
     
         9 . The method of  claim 4 , wherein the quantity of the further order is greater than the quantity of the quantity probe order by a predetermined amount up to the remaining quantity of the initial order. 
     
     
         10 . The method of  claim 4 , wherein identifying one or more second trading venues comprises identifying a plurality of second trading venues eligible to receive a quantity probe order, and wherein creating the quantity probe order comprises creating the quantity probe order with a price within the determined price limit and equal to the displayed best price of an order on the opposite side in any of the plurality of eligible second trading venues. 
     
     
         11 . The method of  claim 1 , wherein automatically creating the price probe order comprises automatically creating the price probe order as an “immediate or cancel” order. 
     
     
         12 . A method for facilitating electronic trading of a financial instrument by a system comprising at least one computer and at least one database comprising stored data relating to orders for the financial instrument in a plurality of electronic trading venues, the method comprising:
 (a) receiving, by the at least one computer, an initial order for the financial instrument, the initial order including a price and a quantity;   (b) determining, by the at least one computer, a price limit, based at least on the price of the initial order, for a quantity probe order for the financial instrument on a same side as the initial order;   (c) identifying, by the at least one computer, a first trading venue of the plurality of electronic trading venues eligible to receive the quantity probe order based on the first trading venue having at least one order for the financial instrument on an opposite side of the initial order with a displayed price and a displayed quantity;   (d) automatically creating, by the at least one computer, the quantity probe order for the financial instrument, the quantity probe order comprising (i) a price within the determined price limit and equal to the displayed price of the at least one order and (ii) a quantity less than the quantity of the initial order and more than the quantity of the at least one order;   (e) automatically placing, by the at least one computer, the quantity probe order in the first trading venue;   (f) after execution of the quantity probe order for the entire quantity thereof, automatically creating, by the at least one computer, another order for the financial instrument on the same side as the initial order comprising (i) a price equal to the price of the quantity probe order and (ii) a quantity at least equal to the minimum trade quantity for the trading venue and up to a remaining quantity of the initial order after execution of the quantity probe order; and   (g) automatically placing, by the at least one computer, the other order in the first trading venue.   
     
     
         13 . The method of  claim 12 , comprising:
 (h) if the other order is executed for less than the remaining quantity, repeating steps (f) and (g) for one or more respective other orders until any remaining quantity is less than the minimum trade quantity for the first trading venue or a trade is not executed.   
     
     
         14 . The method of  claim 12 , comprising:
 (h) if the other order is executed for less than the remaining quantity, repeating steps (f) and (g) until any remaining quantity is less than the minimum trade quantity for the first trading venue or a trade is not executed; then   (i) identifying, by the at least one computer, one or more second trading venues of the plurality of electronic trading venues in which a probe order was not placed and which is otherwise eligible to receive a price probe order based at least on the one or more second trading venues having at least one order with a displayed price or quantity on the opposite side of the initial order;   (j) automatically creating, by the at least one computer, a price probe order for a second trading venue of the eligible trading venues, the price probe order being on the same side as the initial order and comprising (i) a price within the determined price limit and different from displayed prices for all orders for the financial instrument in the second trading venue and (ii) a quantity less than a remaining quantity of the initial order and at least equal to a minimum trade quantity for the second trading venue;   (k) automatically placing, by the at least one computer, the price probe order in the second trading venue;   (l) after execution of the price probe order, automatically creating, by the at least one computer, a further order for the financial instrument on the same side as the initial order comprising (i) a price equal to the price of the price probe order and (ii) a quantity at least equal to the minimum trade quantity for the second trading venue and up to a remaining quantity of the initial order after execution of the price probe order; and   (m) automatically placing, by the at least one computer, the further order in the second trading venue.   
     
     
         15 . The method of  claim 14 , comprising:
 (n) if the further order is executed for less than the remaining quantity, repeating steps (l) and (m) until any remaining quantity is less than the minimum trade quantity for the second trading venue or a trade is not executed   
     
     
         16 . The method of  claim 12 , wherein the original order includes information characterizing the initial order as a pegged order and additional information relating thereto, or information characterizing the initial order as an order with discretion and additional information relating thereto, and wherein the step of determining the price limit comprises determining the price limit also based on such characterizing and additional information. 
     
     
         17 . The method of  claim 12 , wherein the quantity of the created price probe order is equal to the minimum trade quantity for the second trading venue. 
     
     
         18 . The method of  claim 12 , wherein the quantity of the other order is a predetermined quantity up to the remaining quantity. 
     
     
         19 . The method of  claim 12 , wherein the quantity of the other order is greater than the quantity of the quantity probe order by a predetermined amount up to the remaining quantity of the initial order. 
     
     
         20 . The method of  claim 12 , wherein identifying one or more second trading venues comprises identifying a plurality of second trading venues eligible to receive a quantity probe order, and wherein creating the quantity probe order comprises creating the quantity probe order with a price within the determined price limit and equal to the displayed best price of an order on the opposite side in any of the plurality of eligible second trading venues. 
     
     
         21 . The method of  claim 12 , wherein automatically creating the price probe order comprises automatically creating the price probe order as an “immediate or cancel” order.