Automated trading exchange system having integrated quote risk monitoring and integrated quote modification services

Abstract

An automated trading exchange having integrated quote risk monitoring and quote modification services. An apparatus is implemented using at least one computer, having memory, and a processor. The computer is configured to receive orders and quotes, wherein specified ones of the quotes are contained in a quote group, and have associated trading parameters such as a risk threshold. Not all received quotes are required to have trading parameters as described herein. Preferably, the quote group contains all the quotes, or a subset of quotes, belonging to an individual market-maker for a given class of options contracts, or possibly the quotes of two or more market-makers that have identified themselves as belonging to a group for the purposes of risk monitoring and quote modification. The computer typically generates a trade by matching the received orders and quotes to previously received orders and quotes, and otherwise stores each of the received orders and quotes if a trade is not generated. The computer then determines whether a quote within the quote group has been filled as a result of the generated trade, and if so, determines a risk level and an aggregate risk level associated with said trade. The computer then compares the aggregate risk level with the market-maker's risk threshold, and if the threshold is exceeded, automatically modifies at least one of the remaining quotes in the quote group. The computer may also automatically regenerate quotes that have been filled.

1 . A system for processing trades of securitized instruments based on security orders and quotes received from client computers, comprising:
 at least one server computer comprising a memory, and a processor, said server computer configured to perform the steps of:
 receiving orders and quotes, wherein specified ones of said quotes belong to a quote group, and wherein said specified ones of said quotes have associated trading parameters comprising a risk threshold; 
 generating a trade by matching said received orders and quotes to previously received orders and quotes; 
 storing each of said orders and quotes when a trade is not generated; 
 determining whether a quote having associated trading parameters has been filled as a result of the generated trade, and if so, determining a risk level and an aggregate risk level associated with said trade; 
 comparing said aggregate risk level with said risk threshold; and, 
 automatically modifying at least one of the remaining said specified ones of said quotes in the quote group if said threshold is exceeded. 
   
     
     
         2 . The system of  claim 1  further comprising a quote data structure stored in said first memory, said data structure containing a plurality of quotes fields and at least one risk threshold field. 
     
     
         3 . The system of  claim 2 , wherein said plurality of quote fields comprises a bid quote field and an offer quote field. 
     
     
         4 . The system of  claim 2 , wherein said data structure further comprises a group indicator field. 
     
     
         5 . The system of  claim 2 , wherein said data structure further comprises a quote modification increment field. 
     
     
         6 . The system of  claim 2 , wherein said data structure further comprises a quote regeneration increment field. 
     
     
         7 . The system of  claim 2 , wherein said data structure further comprises an owner field. 
     
     
         8 . A method of modifying quotes in an automated exchange trading system that receives orders and quotes from remote computers, matches the orders and quotes to generate trades, and stores orders and quotes that are unmatched, comprising the steps of:
 receiving trading parameters comprising a risk threshold;   associating said trading parameters with specified ones of received quotes;   determining whether a quote having associated trading parameters has ben filed as a result of a generated trade, and if so, determining a risk level and an aggregate risk level associated with said trade;   comparing said aggregate risk level with said risk threshold; and,   automatically modifying at least one of the specified ones of received quotes if said threshold is exceeded.   
     
     
         9 . The method of  claim 8  wherein the step of determining a risk level comprises calculating a delta value for the generated trade. 
     
     
         10 . The method of  claim 8  wherein the step of determining a risk level comprises calculating a trading volume for the generated trade. 
     
     
         11 . The method of  claim 8  wherein the step of determining an aggregate risk level comprises determining a net delta. 
     
     
         12 . The method of  claim 8  wherein the trading parameters further comprise a time duration, and wherein the step of determining an aggregate risk level comprises summing the deltas from trades involving at least a subset of quotes contained in said quote group that were executed within the time duration. 
     
     
         13 . The method of  claim 8  wherein the trading parameters further comprise an integer N, and wherein the step of determining an aggregate risk level comprises summing the deltas from the most recent N trades involving at least a subset of quotes contained in said quote group. 
     
     
         14 . The method of  claim 8  wherein the step of determining an aggregate risk level comprises determining a net contract volume. 
     
     
         15 . The method of  claim 8  wherein the step of determining an aggregate risk level comprises determining a weighted sum of contract volumes. 
     
     
         16 . The method of  claim 8  wherein the step of determining an aggregate risk level comprises determining an aggregate volume quantity. 
     
     
         17 . The method of  claim 8  wherein the step of automatically modifying at least one of the specified ones of said received quotes comprises canceling all said specified ones of said received quotes. 
     
     
         18 . The method of  claim 8  wherein the step of automatically modifying at least one of the specified ones of said received quotes comprises reducing the quantity associated with the specified ones of received quotes. 
     
     
         19 . The method of  claim 8  wherein the step of automatically modifying at least one of the specified ones of said quotes comprises revising at least one of the bid and offer values of each of the specified ones of received quotes. 
     
     
         20 . The method of  claim 8  wherein the trading parameters comprise a positive risk threshold and a negative risk threshold. 
     
     
         21 - 30 . (canceled)