Trading Order Validation System and Method and High-Performance Trading Data Interface

Abstract

A post-trade monitor receives feedback in the form of drop copy messages from an exchange server and validates orders placed with the exchange server by a sponsored access trading platform shortly after the orders have been placed. If a recently placed order is found to violate a rule or regulation, the monitor instructs the trading platform to change to a more restrictive trading mode, such as to cease placing all orders or certain types of orders, at least until certain parameters are met. A library provides an interface in a sponsored access trading platform between a client application program that generates proposed orders and an exchange server. The library provides pre-trade validation of the orders and sends only validated orders to the exchange server. A network enables monitors, trading platforms and libraries to share information about customers' trading activities and locally recalculate customer trading limits resulting from these trading activities. A low-latency interface between a customer server, such as a server that employs algorithmic trading methods to generate buy and sell orders for securities, and a brokerage server that validates such securities trading orders is optimized for handling the securities trading orders. The interface supports a trading command set specifically designed for orders from customer trading application programs, and the interface formats received trading commands into compact messages that are sent over a high-speed communication link to the brokerage server. The interface receives order acknowledgement messages and the like from the brokerage server and invokes callback routines in the customer trading application program to report status information.

Description

CROSS REFERENCE TO RELATED APPLICATIONS[0001]This application claims the benefit of U.S. Provisional Patent Application No. 61 / 295,389, filed Jan. 15, 2010, titled “Trading Order Validation System and Method,” and U.S. Provisional Patent Application No. 61 / 346,998, filed May 21, 2010, titled “High-Performance Trading Data Interface,” the entire contents of all of which are hereby incorporated by reference herein, for all purposes.TECHNICAL FIELD[0002]The present invention relates to computerized trading environments and more particularly to high-performance, low-latency interfaces between client trading platforms and broker trading servers.BACKGROUND ART[0003]“High-frequency” securities traders and commodities traders (collectively herein referred to as “traders”) place and cancel many buy and sell orders (collectively “orders”), although some of the placed orders may never be filled. Essentially, the traders place a large number of orders with a goal of making gains, on the filled ...

AI Technical Summary

Benefits of technology

[0010]An embodiment of the present invention provides a method of facilitating low-latency communication of trading orders from a customer server to a brokerage server. Trading orders are received, via a switched fabric communications facility, from a customer application running on the customer server. The trading orders have been formatted into commands of a dedicated trading command set for use over the facility. The received commands are directed to a brokerage application running on the brokerage server for processing by the brokerage server. The customer application communicates with the brokerage application over the facility without protocol processing by either an operating system of the customer server or an operating system of the brokerage server.

[0036]Another embodiment of the present invention provides a brokered access trading server for pre-trade validation of proposed orders generated on behalf of a customer by a customer trading platform for placement with at least one exchange server. The server may be implemented as a computer system that includes a communication interface configured to communicate via a computer network. The computer system may be configured to receive the proposed orders from the customer trading platform and determine if one of the received proposed orders would cause the customer to exceed a trading limit, if the order were to be placed with the at least one exchange. If the trading limit would not be exceeded, the computer system may send the received proposed order to the at least one exchange server. In addition, the computer system may send information about trading events related to the customer trading platform, via the communication interface. Furthermore, the computer system may receive, via the communication interface, information about trading events related to at least one trading platform other than the customer trading platform. As a result, the computer system may recalculate the trading limit, based on the received information about the trading events.

Problems solved by technology

Thus, very small latency times (typically measured in milliseconds or microseconds) between the identification of potentially profitable trades and the placement of the orders with exchanges are required, because the real-time data, upon which the trade decisions are made, change rapidly and have very short useful lifetimes.

Consequently, these traders' customer servers cannot place orders directly with the exchanges.

In addition, client and brokerage risk departments may impose a number of restrictions.

However, brokers are reluctant to transact such “naked” orders on behalf of their client traders, because of the risks of exceeding trading limits or violating other rules or regulations.

Nevertheless, communication between customer application programs executed by the customer servers on the one hand, and order validation and order routing software executed by the brokerage servers on the other hand, is often slower than desired.

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