Automated auction protocol processor

Abstract

A data processing system for implementing transaction management of auction-based trading for specialized items such as fixed income instruments. The data processing system provides a highly structured trading protocol implemented through a sequence of trading paradigms. The system employs a distributed computer processing network linking together a plurality of commonly programmed controlled workstations. The protocol and its programmed controlling logic enhances trading efficiency, rewards market makers and fairly distributes market opportunity to system users.

Description

[0001] This application is a continuation of U.S. patent application Ser. No. 10 / 382,527, filed Mar. 7, 2003, which is a continuation of U.S. patent application Ser. No. 09 / 294,526 (U.S. Pat. No. 6,560,580), filed Apr. 20, 1999, which is a division of U.S. patent application Ser. No. 08 / 766,733 (U.S. Pat. No. 5,905,974), filed Dec. 13, 1996, each of which are incorporated herein by reference.FIELD OF THE INVENTION [0002] The present invention relates to data processing systems for assisting in financial transactions. More particularly, the present invention relates to a data processing apparatus and method for the managed trading of select classes of securities or other commodities in accordance with specific protocols in an auction format with controlled sequence of auction events. The inventive system is presented in the context of selected fixed income auction protocols for fairly and quickly transacting offer-bid trading. BACKGROUND OF THE INVENTION [0003] Economic activity has ...

AI Technical Summary

Benefits of technology

[0018] Its is another object of the present invention to provide a data processing method supporting a transaction enabling process for trading securities at accelerated levels with minimal errors and costs.

[0023] It is yet another object of the present invention to provide a computer system that includes multiple workstations linked by a high speed communication loop to permit rapid distribution and exchange of market data to participating customers and brokers.

[0024] It is still another object of the present invention to provide a system that rewards customers that create liquidity while insuring customer orders are satisfied in an orderly and equitable fashion.

[0027] Yet another object of this invention is to provide timely order checkout.

Problems solved by technology

This can only be accomplished by permitting full access to the transaction by essentially all potential buyers and sellers.

However, the buyer-seller transaction must be structured to operate at very low costs—or it will distort the market price of goods with the artificially high transactions costs.

Thus, as can be seen, the two keys to effective buyer / seller transactions—full access and knowledge coupled with low costs—can be and are often conflicting, necessitating trade-offs between trading efficiency and market knowledge.

Although successful in bringing interested parties to the transaction, the overall process can be very expensive, adding significantly to the market-distorting transaction costs.

Indeed, some older securities are infrequently traded, creating an illiquid market that may or may not reflect the current market-determined interest rate for that maturity length security.

A significant drawback to this type of auction data capture process is the difficulty in discerning the distinct trading instructions verbalized in rapid succession during a quickly moving market, so that an accurate sequence of data can be captured by brokers and a set of inputters.

However successful, this approach was not perfect.

Indeed, in recent years, some of the problems in a open outcry auction forum have been amplified by the vastly increased level of trading now undertaken in the fixed income field.

Generally, difficulties would occur by the injection of trader personalities into the open outcry auction process.

Although such aggressive actions at open outcry auction may be beneficial to those particular customers in the short run, overall, such dominance of the trading can and will distort pricing away from the actual market conditions.

Other problems exist in open outcry auction that deplete efficient trading.

The speed at which trading flows and the oral nature of the auction process injects a potential for human error that often translates into many millions of dollars committed to trades unrelated to customer objectives.

Shifting position or backing out of previously committed transactions on very short notice is often very difficult in the traditional open outcry auction process.

However, these systems have not significantly impacted the issues presented above as they relate to open outcry auction trading in the fixed income field.

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