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.

What is claimed is: 
     
         1 . An automated system for matching orders from a virtual trading crowd in an exchange configured for trading securities or derivatives comprising:
 an electronic trade engine operative to receive one of an order or 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;   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 comprising 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 allocate orders or quotes according to the allocation algorithm selected from the database.   
     
     
         2 . The automated system of  claim 1 , wherein the exchange comprises a price for the security or derivative that differs from a national best bid or offer price. 
     
     
         3 . The automated system of  claim 1 , wherein the trade processor is configured to generate a quote trigger that occurs for a period of N seconds and allocate a remaining portion of the order or quote, if any, to at least one predetermined market maker guarantor selected from the database to execute the remaining portion of the order or quote at the national best bid or offer price. 
     
     
         4 . The automated system of  claim 1 , wherein the allocation algorithm selected from the database is a maker-taker allocation algorithm. 
     
     
         5 . The automated system of  claim 1 , wherein the request for the price message comprises a price equal to a national best bid or offer price. 
     
     
         6 . The automated system of  claim 1 , wherein the database further comprises market maker guarantor designations. 
     
     
         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;   disseminating a request for price message to a plurality of market makers quoting a class;   receiving at least one response message at the electronic trade engine;   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 the market maker guarantor sets execution parameters for the remaining portion of the order or quote, the execution parameters comprising 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. 
     
     
         11 . The method according to  claim 7 , wherein the allocation algorithm comprises a maker-taker algorithm.