Method and apparatus for determining a price

Abstract

A trading platform and trading method that permit calculation of a price is described. Other embodiments are also described.

What is claimed is: 
     
         1 . A method for permitting a market maker to generate a buy order and a sell order, the method comprising:
 calculating a market price of a predetermined financial instrument by determining a midpoint between a best bid price and a best offer price for the financial instrument;   determining a sale reservation price increment for a sale of a predetermined quantity of the financial instrument,
 in which the sale reservation price increment is calculated based on a predicted change in tracking error of a portfolio that would result from selling the predetermined quantity of the financial instrument; 
   calculating a sale reservation price by adding the sale reservation price increment to the market price;   determining a buy reservation price increment for a purchase of the predetermined quantity of the financial instrument,
 in which the buy reservation price increment is calculated based on a predicted change in tracking error of the portfolio that would result from purchasing the predetermined quantity of the financial instrument; 
   calculating a buy reservation price by adding the buy reservation price increment to the market price;   generating a sell order for the financial instrument at the sale reservation price for the predetermined quantity;   generating a buy order for the financial instrument at the buy reservation price for the predetermined quantity; and   posting the buy order and the sell order to an electronic marketplace.