System and Method for Trading Derivatives in Penny Increments While Disseminating Quotes for Derivatives in Nickel/Dime Increments

a derivative and nickel/dime technology, applied in the field of system and method for trading derivatives in penny increments while disseminating, can solve the problems the effect of increasing the number of derivative quotes, and the inability of trading facilities to efficiently handle the large amount of data associated with large amounts of data

Inactive Publication Date: 2013-10-24
CBOE EXCHANGE INC
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  • Summary
  • Abstract
  • Description
  • Claims
  • Application Information

AI Technical Summary

Benefits of technology

This approach reduces data traffic by aggregating quotes in nickel / dime increments, enabling efficient trading in smaller monetary increments while maintaining manageable data levels, thereby improving the handling capacity of trading facilities.

Problems solved by technology

The large number of quotes per day for derivative products causes practical problems for trading facilities to efficiently handle the large amounts of data associated with quotes.
The problems associated with the large amounts of data created by quotes on derivative products will increase if the format for derivative quotes changes from the current nickel / dime increments to penny increments.
However, changing the standard for derivative quotes from nickel / dime increments to penny increments will greatly increase the number of derivative quotes, and thus the amount of data that must be handled by the trading facilities.

Method used

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  • System and Method for Trading Derivatives in Penny Increments While Disseminating Quotes for Derivatives in Nickel/Dime Increments
  • System and Method for Trading Derivatives in Penny Increments While Disseminating Quotes for Derivatives in Nickel/Dime Increments
  • System and Method for Trading Derivatives in Penny Increments While Disseminating Quotes for Derivatives in Nickel/Dime Increments

Examples

Experimental program
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Embodiment Construction

[0008]FIG. 1 shows a flow chart for one embodiment of a method of trading derivatives on an exchange in increments of hundredths of a monetary unit, such as a penny, while disseminating quotes for derivatives in increments of twentieths / tenths of a monetary unit, such as a nickel / dime. Generally, entities inside an exchange such as a broker or a market maker would be permitted to send quotes to the exchange in penny increments at 102. A trading engine within the exchange receives the quotes in penny increments at 104; rounds out the quotes in penny increments to quotes in nickel / dime increments at 106; aggregates individual quotes in nickel / dime increments at 108; disseminates the aggregate nickel / dime quotes at 110; receives offers to take positions in derivatives based on the aggregate nickel / dime quotes at 112; executes buy and sell orders for the derivatives based on the aggregate nickel / dime quotes at 114; and disseminate the result of the buy and sell order execution in penny ...

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Abstract

A system and method for trading derivatives in penny increments while disseminating quotes for derivatives in nickel / dime increments is disclosed. A trading engine receives quotes for a derivative in penny increments from at least one entity. The trading engine rounds out the quotes for the derivative in penny increments to quotes for the derivative in nickel / dime increments. The quotes in nickel / dime increments are aggregated and disseminated. The trading engine receives bids and offers to take positions in the derivative based on the aggregate quotes for the derivative in nickel / dime increments and executes trades for the derivative by matching bids and offers to buy and sell positions in the derivative.

Description

RELATED APPLICATIONS[0001]The present application is a continuation of U.S. patent application Ser. No. 11 / 416,711 (still pending), filed May 3, 2006, claims priority to Provisional U.S. Patent Application No. 60 / 678,267, filed May 5, 2005, the entirety of each of which are hereby incorporated herein by reference.BACKGROUND[0002]Currently, a single trading facility such as an exchange may offer over 100,000 of its own derivative products and handle over 650 million quotes per day for all derivative products. The large number of quotes per day for derivative products causes practical problems for trading facilities to efficiently handle the large amounts of data associated with quotes.[0003]Many of the quotes for derivative products are quotes for a small number of derivatives with similar prices. The problems associated with the large amounts of data created by quotes on derivative products will increase if the format for derivative quotes changes from the current nickel / dime increm...

Claims

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Application Information

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Patent Type & AuthorityApplications(United States)
IPC IPC(8): G06Q40/04
CPCG06Q40/04
InventorTILLY, EDWARD T.GUST, CHRISTOPHER
OwnerCBOE EXCHANGE INC