Abstract:
A system conducts anonymous negotiations and supports indications of interest in trading stock. The system includes a database for storing public orders received from a public stock trading system; and a server for receiving hidden orders from a plurality of users and for conducting anonymous negotiations between first and second users with the hidden orders. The server repeatedly accesses the database to determine a match of any one of the hidden orders with any one of the public orders, and to execute a pair of orders selected from the hidden orders and the public orders. The system also transmits indications of interest (IOIs) into a trading environment using the server for processing a trading order from a first user and for maintaining a profile of a user. The profile includes a current IOI setting for controlling transmission of the IOI from the user. The server responds to a toggle command from the first user to control transmission of the RN opposite to the current RN setting. The server responds to the ICH setting being set to allow transmission by transmitting the IOI of the first user associated with the trading order.

Description:
[0001]    This application is a continuation of application Ser. No. 12/192,253, filed Aug. 15, 2008 (issued Aug. 8, 2013 as U.S. Pat. No. 8,504,483), which is continuation of application Ser. No. 09/412,408, filed Oct. 5, 1999 (issued Jan. 6, 2009 as U.S. Pat. No. 7,745,056). The priorities of application Ser. Nos. 12/192,253 and 09/412,408 are hereby claimed, and the disclosures of application Ser. Nos. 12/192,253 and 09/412,408 are hereby incorporated herein by reference. 
     
    
     COPYRIGHT NOTICE 
       [0002]    A portion of the disclosure of this patent document contains material which is subject to copyright protection. The copyright owner has no objection to the facsimile reproduction by anyone of the patent document or the patent disclosure, as it appears in the U.S. Patent and Trademark Office patent files or records, but otherwise reserves all copyright whatsoever. 
       BACKGROUND OF THE INVENTION 
       [0003]    The present invention relates to electronic trading systems, and, more particularly, to a system and method which acts as an introducing broker to arrange electronic trades in financial instruments. 
         [0004]    Alternative trading systems are being implemented with capabilities beyond the traditional exchanges for commodities, stocks, and financial instruments. For example, electronic trading systems can perform trade-matching between buyers and sellers, which increases the communications and liquidity of capital for greater market efficiencies. 
         [0005]    In the financial arts, electronic communications networks (ECNs) refer to computerized trade-matching systems which are capable of uniting the best bid and offer prices, as well as providing investors with anonymity and reduced transaction costs. For example, such ECNs may bypass broker-dealer commissions as well as exchange fees. An ECN allows its participants such as brokers/dealers, market makers, and buy-side institutions to post bids and offers into a market quote, such as the “NATIONAL ASSOCIATION OF SECURITIES DEALERS AUTOMATED QUOTATIONS” (NASDAQ) system. 
         [0006]    Order handling rules have been implemented by the Securities and Exchange Commission (SEC), which mandate disclosure by market makers of any ECN order in a trade quote at the time of the trade. The lack of anonymity may expose, for example, excessive trades by specific institutions and companies which may, in turn, have a negative impact on the markets, such as causing runs in stocks and wild and volatile swings in markets. Accordingly, such exposure may chill trading by market makers of ECN orders, and so reduces liquidity and efficiency in trading systems. 
         [0007]    A need exists for an anonymous trading system which complies with applicable market disclosure rules. 
         [0008]    Trading systems also support messaging and displayed information as indications of interest (IOI) of an entity willing to enter into a trade and soliciting opposite parties or contras in a trade. Anonymous indications increase trading liquidity. However, on occasion brokers use IOIs, and especially anonymous IOIs, to perform fishing; that is, to send empty or insincere IOIs to solicit half of a transaction, and then to seek to fill the other half. 
         [0009]    A need exists for a trading system which promotes IOIs and their benefits but which discourages fishing IOIs. 
       OBJECTS AND SUMMARY OF THE INVENTION 
       [0010]    Objects of this invention are to fill the needs described above. 
         [0011]    These and other objects are achieved in accordance with the invention by an electronic trading system and method which support anonymous negotiation complying with order-handling rules, and which support indications of interest (IOI) while discouraging fishing IOIs. 
         [0012]    In accordance with one embodiment of the invention, stocks are electronically traded using an electronic trading system while supporting anonymous negotiation and maintaining the identity of the trading parties anonymous with respect to each other and with respect to users of the trading system. In this embodiment, trades may be executed between two users of the system (between hidden orders) and between a user of the system and a third party (between a hidden order and a public order). 
         [0013]    In accordance with this embodiment, a first party offers to buy or sell over the system a number of shares of stock selected by the first party at a price selected by the first party from or to one or more counterparties selected by the first party. In the preferred embodiment, anonymous negotiations may be conducted between a first party and a plurality of prospective counterparties (second users) selected by the first party. The first party and a counterparty electronically agree to trade up to an agreed number of shares of the stock at an agreed price. However, if there is no better trade in at least one stock order originating from outside the system for the particular stock for either the first party or the counterparty, the system electronically executes the trade agreed to by the first party and the counterparty, otherwise the system executes the better trade. A trade may be executed where the number of shares on the buy side of an order is less than on the sell side, with the system executing a trade for the number of shares on the buy side. 
         [0014]    The first party offering to buy shares from or sell shares to one or more selected counterparties selects the one or more counterparties from the users identified by the system as engaging in recent trade or order activity in particular stocks. User stations may be provided having an input device and an output device, and available anonymous negotiation partners may be selected by a user from a list provided by the system using an input device. The first party and the counterparty electronically negotiate the price of the stock or the number of shares of the stock, or both, over the system prior to agreeing to the trade, and whether there is a better trade in the particular stock for either the first party or the counterparty is determined at least once during the negotiating step and at least once after completion of the negotiating step and before any trade is executed between the first party and the counterparty. Preferably this is determined repeatedly during the course of a negotiation. 
         [0015]    Thus, a trade is not executed between users of the system if there is a better trade with a third party. Whether a better trade is available, i.e., whether there is a match of any one of the hidden orders with any one of the public orders, may be repeatedly determined. Depending upon whether a better trade is available, a pair of orders selected from the hidden orders and the public orders is executed. A trade is executed in accordance with a priority when the same trade becomes available between two orders originating within the system and an order originating from within the system and an order originating from outside the system. In the preferred embodiment, priority of trade execution is given to orders originating within the system. 
         [0016]    In accordance with another embodiment of the invention, interest may be determined in a stock among users of an electronic stock trading system only in association with an order entered by a user. In this embodiment, the electronic trading system comprises at least one computer with associated computer memory and a plurality of user stations coupled thereto via a communications network. The at least one computer is programmed to match orders entered into the user stations by users and to execute trades of matched orders, and has a listing of system users accessible by any system user via a user station. Responsive to user input via user stations, the at least one computer is programmed to create a subset or profile of system users selected by a user to which that user authorizes the system to transmit an indication of interest (TOT) in a stock for which that user has entered an order. A user at a user station selects users from the list of users, and the system transmits the IOI to the selected users only when the user enters an order at the user station for the particular stock. Thus, in this embodiment, an indication of interest (IOI) is transmitted only in association with an order entered by a user. 
         [0017]    The IOI may be transmitted automatically in association with the order unless overridden by a command entered with the order, or pursuant only to a command entered with the order. The transmit or override command is preferably entered via a keyboard in the user station. Preferably, an IOI will be transmitted in association with an order only if the order exceeds a threshold quantity, or if that order and any uncancelled orders for the same stock entered by the same user exceed a threshold quantity. 
         [0018]    The trading system includes a database for storing public orders received from a public stock trading system; and a server for receiving hidden orders from a plurality of users and for conducting anonymous negotiations between first and second users with the hidden orders. The server repeatedly accesses the database to determine a match of any one of the hidden orders with any one of the public orders, and to execute a pair of orders selected from the hidden orders and the public orders. The system also transmits indications of interest into a trading environment using the server for processing a trading order from a first user and for maintaining a profile of a user. The profile includes a current IOI setting for controlling transmission of the IOI from the user. The server responds to a toggle command from the first user to control transmission of the IOI opposite to the current IOI setting. The server responds to the IOI setting being set to allow transmission by transmitting the IOI of the first user associated with the trading order. 
     
    
     
       BRIEF DESCRIPTION OF THE DRAWINGS 
         [0019]      FIG. 1  illustrates the disclosed trading system; 
           [0020]      FIG. 2  illustrates the system of  FIG. 1  in greater detail with modules used for negotiated trades; 
           [0021]      FIG. 3  illustrates the system of  FIG. 1  in greater detail with modules used for processing indications of interest; 
           [0022]      FIG. 4  illustrates a flowchart for performing negotiated trades; 
           [0023]      FIG. 5  illustrates a flowchart for processing indications of interest; 
           [0024]      FIG. 6  illustrates a screen display of a TRADEBOOK quote monitor; 
           [0025]      FIG. 7  illustrates a screen display showing stock price status; 
           [0026]      FIG. 8  illustrates a screen display of available trades for negotiation; 
           [0027]      FIG. 9  illustrates a screen display of  FIG. 8  with trades selected for negotiation; 
           [0028]      FIG. 10  illustrates a pop-up window for setting negotiation terms; 
           [0029]      FIG. 11  illustrates a screen display of a TRADEBOOK negotiations monitor; 
           [0030]      FIG. 12  illustrates the screen display of  FIG. 11  with additional trades and their status; 
           [0031]      FIG. 13  illustrates a pop-up window for accepting or declining a negotiated trade; 
           [0032]      FIG. 14  illustrates the screen display of  FIG. 12  with additional trades and their status as expired; 
           [0033]      FIG. 15  illustrates a screen display for viewing the settings of a user&#39;s profile; 
           [0034]      FIG. 16  illustrates the screen display of  FIG. 15  with a pop-up window for changing a setting of a user profile; 
           [0035]      FIG. 17  illustrates a screen display of multiple trades; 
           [0036]      FIG. 18  illustrates a screen display of a log of daily trading activity; and 
           [0037]      FIG. 19  illustrates a screen display of posted indications of interest. 
       
    
    
     DETAILED DESCRIPTION OF THE PREFERRED EMBODIMENT 
       [0038]    Referring to  FIG. 1 , the disclosed trading system  10  includes a “TRADEBOOK” server  12  executing the “TRADEBOOK” software available from “BLOOMBERG TRADEBOOK LLC” to receive trading information from a plurality of users using the user stations  14 - 16  through a gateway  18  and a communications network  20 , which may be, for example, an intranet, or a public services telephone network (PSTN). Alternatively, the communications network  20  may be the Internet. In addition to the gateway  18 , the system  10  and/or the communications network  20  in any embodiment may provide appropriate data security; for example, using encryption and firewalls. 
         [0039]    The server  12  displays information on stocks and other securities to the users through the monitors  22 - 24 , and the users may enter selections and commands such as buy and offer messages using the data inputs  26 - 28 , which may be input devices which may include a keyboard, a mouse, or other input devices such as a graphic user interface (GUI). 
         [0040]    The server  12  includes a processor  30  for executing the “TRADEBOOK” software to conduct trading with anonymous negotiation and indications of interest features as described herein, such that the system  10  acts as an introducing broker to arrange transactions with the “NASDAQ” trading system  32  and/or the “AUTEX” system  34 . The “TRADEBOOK” software may be stored in the memory  36  and is capable of acting as an agent for both sides of each trade, with fees charged to both participants and non-participants of the system  10  on a per-transaction-basis. The securities which may be traded on the system  10  may include NASDAQ, NASDAQ Small Cap, and exchange-listed U.S. equity securities, as well as American Depository Receipts (ADRs), such as pink sheet and bulletin board types of securities which are eligible for continuous net settlement by book entry through the National Securities Clearing Corporation and the Depository Trust Company. 
         [0041]    In an alternative embodiment, the system  10  may include an indication of interest (IOI) server  38 , shown in  FIG. 1 , for processing IOIs through the TRADEBOOK server  12 , as described herein, to provide IOI functionality to the “BLOOMBERG TRADEBOOK” system  10  and to users thereof. 
         [0042]    Referring to  FIG. 2 , the TRADEBOOK server  12  includes various modules, which may be hardware and/or software, for processing TRADEBOOK orders and data and for interfacing the users  40  using the user stations  14 - 16  to the NASDAQ trading system  32  as well as to other systems such as a client&#39;s open market system (OMS)  42 . The modules may be referenced with file names and/or designations beginning, for example, with “BT” for “BLOOMBERG TRADEBOOK”. 
         [0043]    User inputs and data from the uses 40 and user stations  14 - 16  are processed in real-time using the processor  30  executing the BTBIG module  44  and the BT2LINE module  46 , which receive and format the input data for orders and messages for use by the TRADEBOOK server  12 . Data to be displayed back to the user  40  is sent to the BTMON module  46 , which is a monitoring module for translating information to the format used by BTBOOK  54  and for sending output data to the monitors  22 - 24  and for controlling the data displayed on the monitors  22 - 24  of the user stations  14 - 16 , respectively. The monitors  22 - 24  provide outputs to respective users through portions  50  of the screen, with the BTBIG module  44  for processing data from the lower portion of the screen, and the BT2LINE module  46  for handling and displaying the data from the first two lines in the upper portion of the screen, shown in  FIG. 6 . 
         [0044]      FIG. 6  illustrates a typical “BLOOMBERG TRADEBOOK” screen display for use by traders to efficiently and quickly provide a significant amount of up-to-date information upon entry of simple commands. In addition, the activation of commands and the display of additional information is also provided by using a GUI with GUI-based input devices such as a mouse. For example, text, numbers, and regions of the screen may be active for actuation by the user. In one example, double-clicking the stock name “INTC” may generate a chart of activity of prices of the “INTEL CORPORATION” stock. In another example, double-clicking a mouse over the market maker name “BTRD” may generate information about the market maker, such as the full name and contact information, in which “BTRD” corresponds to “BLOOMBERG TRADEBOOK” as the source of the 62.5 bid for 70,000 shares of INTC shown in  FIG. 6 . 
         [0045]    The particular example screen shown in  FIG. 6  is a TRADEBOOK quote monitor screen which is generated by the trader entering the command BTMQ which may stand for “BLOOMBERG TRADEBOOK” market (or monitor) quote, with the command mnemonic “BTMQ” which generated the present screen in  FIG. 6  being displayed, for example, in the upper right corner of the screen of  FIG. 6 . Other types of screens may be provided to users of “BLOOMBERG TRADEBOOK”, such as screens showing order tickets, order blotters, monitoring of a single security, monitoring of a composite or set of securities in one&#39;s portfolio or field of trading, and multiple buy and sell orders in the same security. 
         [0046]    Referring to  FIG. 2 , the BT2LINE module  46  of the system  10  displays input commands back to the user. For example, to buy 10,000 shares of “INTEL CORPORATION” shares having the trading symbol INTC at $62 per share, a user  40  may input the command line: &lt;BUY&gt;INTC 10000 62&lt;GO&gt; through the data input  26 . The keywords &lt;BUY&gt; and &lt;GO&gt; may be input as text, or may be predetermined hotkeys or function keys or combinations thereof on a standard keyboard, or alternatively may be specialized keys on a customized keyboard available, for example, through “BLOOMBERG LP”. For example, the &lt;GO&gt; command may be the traditional ENTER or RETURN key, or may be a customized keyboard button with the word “GO” imprinted as indicia thereupon. The indicated command line is processed by BT2LINE  46 , which in turn is processed by BTMON  48  to display the command on a tool line, for example, at the top of a predetermined displayed screen through the monitor  22  as shown in the example screen shown in  FIG. 6 . 
         [0047]    Any input commands such as orders corresponding to negotiations between traders are processed through a BTNEGOT module  52  which processes the negotiation messages as described herein in conjunction with  FIG. 4 . BTNEGOT  52  consults a book of trades processed by the BTBOOK module  54  and stored in the memory  34 , which may be a database such as the BTRADE-DB  56 , which is accessible by the BTBOOK module  54 . Through BTBOOK  54 , the book in BTRADE-DB  56  is updated to reflect orders, current prices, and data available from the NASDAQ trading system  32 , as well as cancellations of orders and logs of activity. In particular, the BTBOOK module  54  is operatively connected to the NASDAQ trading system  32  through a BTFEED module  58 , which feeds data such as order and quote data from NASDAQ  32 . In addition, the BTBOOK module  54  is connected to the SELECTNET system of NASDAQ  32  through a “BLOOMBERG TRADEBOOK” NASDAQ WORKSTATION (BTNWS) computer-computer interface (CCI)  60 , which connects BTBOOK  54  to SELECTNET to receive and transmit orders. 
         [0048]    BTBOOK  54  also receives order and trading data from the client OMS  42  through a BTFIXCCI module  62  and a BTFIXSRV module  64 , which are respectively a financial information exchange (FIX) CCI application and a FIX receiver application for feeding financial data to BTBOOK  54 . In particular, the BTFIXCCI module  62  translates and/or formats the received financial data to a format for use by BTBOOK  54 . The BTFIXSRV module  64  acts as a local node for the TRADEBOOK server  12  for identification of the server  12  with other systems and components. 
         [0049]    Since trades may also be associated with indicators of interest (IOI), BTBOOK  54  may optionally be connected to a BTIOI module  66  for processing IOIs in conjunction with trades with anonymous negotiations through BTNEGOT  52 . The BTIOI module  66  may be connected to the RN server  38  shown in  FIG. 1 . 
         [0050]    In an alternative embodiment shown in  FIG. 3 , the TRADEBOOK server  12  may support IOIs associated with trades executed without anonymous negotiations. For example, the BTIOI module  66  may be connected to the IOI server  38  through the BTFIXSRV module  64  of the TRADEBOOK server  12  and also to the AUTEX automatic trade execution system  34 . The IOI server  38  may be connected to the user  40  through the communications network  20  and to the TRADEBOOK server  12  through various modules. For example, the IOI server  38  may include a corresponding BTFIXSRV  70  which interfaces with the BTFIXSRV  64  to access and to post IOIs to the AUTEX system  34 . 
         [0051]    A corresponding BTFIXSRV module  68  connects the IOI server  38  to external systems such as the TRADEBOOK server  12 , and so the BTFIXSRV module  68  identifies the IOI server  68  to such external systems. The BTFIXSRV modules  64 ,  68  may be identical in implementation. The IOI server  38  of “BLOOMBERG TRADEBOOK” (BTRD) includes a decoder (BTRDDCD) module  70  which performs auto-execution of the IOI software to take messages received through the BTFIXSRV module  68  and to translate such messages into a format for use by the IOISERV module  72  to process the IOIs. 
         [0052]    The IOISERV module  72  also posts the IOIs for display with associated data to the monitor of the user  40  through an equity order monitor (EOMON) module  76  separate from the monitor module BTMON  52  of the TRADEBOOK server  12 . In particular, the EOMON module  76  may be configured to filter IOIs according to the settings of each particular user, for example, to prevent the display of certain brokers. 
         [0053]    At the request of the user, the IOISERV module  72  also causes the display of all IOIs. In addition, the BTMON module  48  operates with the IOISERV module  72  to determine and to display, for each particular user, the most recent IOIs involving the particular user, such as the two most recent IOIs sent by the user. 
       Anonymous Negotiations 
       [0054]    In operation, as shown in  FIG. 4 , the system  10  supports negotiation features, which allow broker-dealers and institutional participants to initiate anonymous negotiations on a one-on-one basis with other participants of the system  10 . A participant may designate whether or not to receive negotiation messages, and may initiate a negotiation with another participant having an open order, an expired order, or an executed trade on the system  10 . Such negotiations may be performed in conjunction with the indications of interest (IOI) feature of the system  10 , as described herein. 
         [0055]    When a trader enters an order, the processor  30  of the TRADEBOOK server  12  using, for example, BTBIG  44 , checks the book of orders in BTBOOK  54  reflecting NASDAQ orders for a match to the trader&#39;s order. If no match exists, anonymous negotiations may occur, as shown in step  78  of  FIG. 4 , with the book being checked constantly and/or regularly for a match with the negotiated orders. 
         [0056]    By entering a “BTP” command, a trader is then presented with a BTP stock price status screen shown in  FIG. 7 , which lists for the indicated stock, such as INTC for “INTEL CORPORATION”, the most recent activity of the stock such as orders for selling and buying in screen portions  116 - 118 , respectively. If the trader viewing the status screen of  FIG. 7  wishes to negotiate to buy or sell an unmatched order, the trader may select and actuate the commands “NEGOTIATE TO SELL” or “NEGOTIATE TO BUY”, at screen portions  120 - 122 , respectively. For example, the trader, as the first participant of the negotiation, may use a predetermined function key, or may actuate, through a GUI, the text at portions  120 - 122 . 
         [0057]    For example, for negotiating to buy the INTC stock, activation of text  122  causes BTNEGOT  52  to generate the Negotiate-to-Buy screen shown in  FIG. 8  for display on the respective one of the monitors  22 - 24  associated with the first participant. The Negotiate-to-Buy screen may display the total shares bought that day by the first participant, and the quantity of shares of the first participant displayed to others. 
         [0058]    On the screen shown in  FIG. 8 , the most recent trading activity of orders for the stock, for example, TNTC, is displayed with the date, quantity, and price. The first participant may select one or more of the orders to engage in negotiations, for example, by actuating the empty box icons  124  through a GUI. The empty boxes are then changed to filled or X-ed boxes  126  as shown in  FIG. 9 . The first participant may select any number of available orders for negotiation, or alternatively only a predetermined number of orders may be selected, such as eight or ten. 
         [0059]    During negotiation, a participant enters a firm negotiation order in step  80  of  FIG. 4 , which is an order which results in a trade if accepted by the recipient of the negotiation message. To enter the negotiation order, for example, for a negotiation to buy, the system  10  generates a pop-up window  128  or sub-screen, such as shown in  FIG. 10 , for inputting a negotiation price as well as limits to exposure of the first participant in the negotiations. For example, as shown in  FIG. 10 , Participant A sends a negotiation message to sell 50,000 shares of a designated security at, for example, $84.25 per share to Participant B and other participants who entered the sale orders in  FIG. 9 . Through the pop-up window  128  of  FIG. 10 , the first participant may limit his/her trading exposure to 60,000 shares. A second participant such as Participant B may then conduct anonymous negotiations with the first participant using firm acceptances or counter-offers in step  82  of  FIG. 4 . 
         [0060]    Once negotiations have begun, the first participant who initiated the negotiation may view the action on the negotiation through a negotiations monitor screen shown in  FIG. 11 . As responses from other participants provide counter-offers or acceptances, such action is also then displayed on the negotiations monitor screen of the first participant shown in  FIG. 12 . The first participant may then select which counter-offer or acceptance to accept or decline by actuation of the respective text in  FIG. 12  using a GUI. For example, when the first participant double-clicks a mouse when a cursor is positioned over action number  1  of  FIG. 12  with an offer for 3000 shares at a price of 77 from a second participant, a pop-up window  130  is generated as shown in  FIG. 13 . Using the window  130  in  FIG. 13 , the first participant can accept or decline the offer of 3000 shares at 77, and the negotiation in that instance is then complete. If the negotiation is accepted on both sides, then the order is executed automatically unless there is a match with the book of public orders. 
         [0061]    As shown in  FIG. 14 , the various orders may have time limitations for matching, negotiation and/or acceptance. Accordingly, stale negotiations may be cancelled as expired, as in action items  3 - 4  in  FIG. 14 . The first participant may re-initiate negotiations on different terms, such as the more favorable prices of 77 per share as shown in action item  1  in  FIG. 14 . 
         [0062]    In the described example with Participant A, if Participant B responds to the negotiation message to buy only 20,000 shares of the offered security at the offered price, the server  12  matches the two orders in step  84  of  FIG. 4 , and a trade for the 20,000 shares is executed without further action by either participant if no match is in the book as per steps  86 - 90 . 
         [0063]    Alternatively, if Participant B responds to the negotiation message with a counter-offer in step  82  instead of communicating an acceptance, the counter-offer may also to be a firm offer, and may propose a different quantity and/or a different price per share for the same security. In other alternative embodiments, the offers, acceptances, and counter-offers may not be film and so may be subject to confirmation by the last accepting party. 
         [0064]    All negotiation initiators and counter-offerors may be required to enter and accept firm quantities and firm prices to ensure that the participants conduct good-faith negotiations and so to prevent participants from testing the waters; for example, by sending insincere negotiation bids or offers, or even counter-offers, and then backing out of the trade if the contra-side participant communicates an acceptance. 
         [0065]    A negotiation order may be all-or-none as to terms, may specify a minimum which is to be taken, or may state that the initiator of the negotiation is open to a counter-offer with a quantity of a different size. The system  10  may also support the use of reserves for trading; for example, if Participant A&#39;s negotiation order is over a predetermined threshold, such as 10,000 shares, Participant A may designate a reserve, which is not displayed to Participant B who received the negotiation message. During negotiation in which Participant A sends an order with a displayed quantity and a non-displayed reserve quantity, if Participant B responds with a counter-offer indicating a match on price but with a quantity which is greater than the displayed quantity yet within the total reserve amount, then the reserve of Participant A is automatically drawn to allow the trade to go forward to meet the quantity of the counter-offer. 
         [0066]    However, using reserves, if the counter-offer quantity exceeds the reserve quantity, the counter-offer is executed up to the amount of the reserve, unless the counter-offer is specified by Participant B as being all-or-none. In an all-or-none situation, execution does not occur without a subsequent communication from Participant A of an increase in the offered display quantity or of an increase in the reserve quantity. 
         [0067]    When a trader sets a cap for his/her exposure, such as 10,000 shares split among multiple parties in negotiation, the system  10  ensures that the cap is not exceeded during negotiation by hidden messages and during trading with the public trades in the book. In particular, the caps are enforced by determining when the cap is met or would be exceeded by additional trades, and then by canceling all outstanding hidden messages reflecting orders which exceed or would exceed the cap. 
         [0068]    Negotiation orders are independent of other displayed orders on the system  10  unless the negotiation process is complete. When a negotiation order is initially entered by Participant A using, for example, user station  14  of  FIG. 1  through a data input device  26 , the displayed portion of the negotiation order is only displayed to the participant designated by the initiator of a trade, but the negotiated order is capable of interacting with publicly displayed orders, for example, during matching, when such orders are at the same price. 
         [0069]    For example, if the best displayed bid in the system  10  is at 84.25 and the negotiation bid is entered at 84.375, a subsequent offer entered into the system  10  by the participant at 84.375 automatically hits the 84.375 negotiation bid, up to the full amount of the negotiation quantity and reserve. Such matching and hitting of bids occurs even for anonymous and/or invisible bids. For example, although the negotiation bid in the above example is not displayed to the participant as part of the anonymous negotiation method, the negotiation bid is still able to be matched with the 84.375 offer. 
         [0070]    The negotiation feature using anonymous bids and offers is intended to comply with the ECN Alternative for alternative trading systems specified in Order Execution Rules of the Securities and Exchange Commission (SEC), which do not require an order in an alternative trading system to be displayed publicly if the order is shown only to one other person or entity. For example, the Exchange Act Release No. 40760 of Dec. 8, 1998, published at 63 Federal Register 70844 on Dec. 22, 1998, states after note  190  that “alternative trading systems are not required to provide the public quote stream orders displayed to only one other alternative trading system subscriber, such as through the use of a negotiation feature”. The system  10  using the “TRADEBOOK” server  12  executing the “TRADEBOOK” software available from “BLOOMBERG TRADEBOOK LLC” may be used as or in conjunction with an alternative trading system for allowing users to negotiate orders for the “NASDAQ” trading system  32 . 
         [0071]    Accordingly, while negotiations occur anonymously using hidden orders in steps  78 - 84  shown in  FIG. 4  after no initial match of booked public orders, orders may enter the book during the anonymous negotiations. While the anonymous negotiations occurs, the system  10  continues to consult the book of public trades in step  86  for a match of a public trade with either side of the anonymously negotiated trade. In step  88 , the system  10  determines if there is a match of one party in the anonymous trade with the book  36 . If not, for example, if the company stock or the type of company stock of the negotiated trade differ from every entry in the book  36 , then no match with the book  36  exists and so the negotiated trade is executed in step  90 . 
         [0072]    However, if there is a matching trade in step  88 , the system  10  determines if the prices of the book trade and the negotiated trade are identical in step  92 . If not, the trade having the better price is executed in step  94 . For example, Participant A is interested in buying 10,000 shares of INTEL at  62 , and has negotiated with Participant B to buy the shares of INTEL at  64 . After negotiations are finalized, if an order in the book  36  is present from Participant C to sell 10,000 shares of INTEL at  63 , then from the perspective of Participant A, Participant C has the lower and therefore better price of 63 per share instead of 64 per share from Participant B. Accordingly, despite negotiations with Participant B, a trade between Participants A and C is executed at the better price of 63. 
         [0073]    After anonymous negotiations, the terms of the trade may be identical to a later book entry, including identical in price. Therefore, in step  92 , the prices are identical, but the negotiated trade takes precedence so the system  10  executes the negotiated trade at the negotiated price  96 . In this matter, the system  10  maintains price/time priority, in which the best price governs the trade and, if prices are identical, the negotiated trade is deemed to have time priority over a later-received trade in the book  36 . Accordingly, traders having identical trades with later book trades are not penalized for entering into negotiations. 
         [0074]    Any parties rejected during negotiation may later propose new trades and so may enter into the final trade outside of negotiation as per steps  86 - 96 . For example, Participant A selects Participants B and C for anonymous negotiation, but finalizes an anonymously negotiated trade with Participant B. Participant C is thus rejected during negotiation, but may re-enter a trade in the book  36 . During steps  86 - 88 , despite the negotiation between Participants A and B, the negotiated trade is compared to the publicly booked trade of Participant C. If Participant C can beat the price of Participant B in step  92 , then Participant C may enter into the final trade with Participant A at the better price. 
         [0075]    Accordingly, trading and liquidity are improved by the system  10  using anonymous negotiations which comply with appropriate regulatory market rules for improved prices and market efficiency. 
       Indications of Interest 
       [0076]    Referring to  FIG. 3 , the system  10  also supports the use of an indications feature which allows only certain participants (e.g., institutional participants) to advertise a desire to negotiate by sending indication of interest (IOI) messages to other institutional participants via IOI software applications or services. Such indications may specify only the security ticker and the side of the indication as being for a buy or a sell, and may also include a notation that the security is negotiable on the system  10 . Indications may be set to not show any price, size, or identification of the participant. 
         [0077]    The system  10  maintains user profiles to control the transmission of IOIs, with a default setting permitting transmission by any particular user. These profiles are in effect subsets of system users to which a user wants IOIs to be transmitted by the system. A user accesses a list of users from which the user creates the profile. In the preferred embodiment, the system  10  also supports the use of IOIs only between institutional traders and not from individual brokers, in order to reduce or eliminate “fishing” for interest. The user profile may specify whether or not the user is an institution. The user profile may be modified by the user to change the IOI default setting, but may not be modified by the user to change the user&#39;s designation of being or not being an institutional trader. 
         [0078]    As shown in  FIG. 5 , the system  10  uses the components and modules of  FIGS. 1 and 3  to perform the steps  98 - 114 . Upon receiving an order for stock in step  98  from an initiator of the trade, the system  10  checks the user profile of the initiator in step  100  to determine the present value of the IOI setting, which may be the default value or a customized setting. If the IOI setting is determined in step  102  as being set to transmit an IOI with the trade, then the method proceeds to step  104 . 
         [0079]    Otherwise, the system  10  determines in step  106  whether the initiator has entered an toggle command to override the current IOI setting in the initiator&#39;s profile. For example, when entering an order in the tool line  50  of  FIG. 6 , the initiator may include a “IN” command, such that the order shown in  FIG. 6  instead reads:
       &lt;BUY&gt;INTC 10000 62/N&lt;GO&gt;
 
which toggles the system  10  to use, for this trade only, the exact opposite of the IOI setting in the initiator&#39;s profile. The “N” in the “/N” command represents NATURAL Institution-to-Institution-Only Indications of Interest. Accordingly, the initiator of orders need not continuously reset the IOI setting in the user&#39;s profile to transmit IOIs. It is understood that other commands, function keys, or hotkeys may be used to toggle the initiator&#39;s profile settings.
       
 
         [0081]    If no toggle command is present and the IOI setting is set to not transmit an IOI message as determined in steps  102  and  106 , then the system  10  in step  108  does not send an IOI message. However, in step  106 , if a toggle command is present in step  106  to use the opposite of the IOI setting to not transmit as determined in step  102 , then the system proceeds to step  104 . 
         [0082]    In step  104 , the system  10  may optionally determine if the initiator is an institutional trader, for example, by checking the profile of the initiator which may include a designation or flag indicating whether or not the initiator is an institutional trader. If the initiator is not an institutional trader, then the system  10  performs step  108  to not send the IOI message, since such IOI functionality is reserved for institutional traders to prevent fishing for trades, as described herein. 
         [0083]    However, in step  104 , if the initiator is an institutional trader, then the system  10  determines if a combined quantity of the stock from all uncancelled orders for the stock exceeds a predetermined threshold in step  110 . For example, the system  10  may support IOIs which involve a combined total of, for example, 10,000 shares of a given stock, in order to ensure that enough overall interest is present for serious institutional traders to enter into trades of the stock. 
         [0084]    If the predetermined threshold is not met in step  110 , the system  10  holds the IOI message in step  112  for every initiator and returns to step  98  to receive more orders for the stock. Otherwise, in step  110 , with the predetermined threshold met, the system  10  sends the IOI message associated with the order or orders of the particular stock in step  114 . 
         [0085]    As shown in  FIG. 15 , the system  10  responds to a command from a user to display a screen on the respective monitor  22 - 24  of the user for viewing the settings of a user&#39;s profile, such as the setting for sending out IOIs. Using a mouse and GUI as the data inputs  26 - 28  for moving a cursor to the “Y” in a field adjacent to the “SEND IOIs” setting, or alternatively using highlighted portions of the screen of  FIG. 12  with a cursor moved by tabs or other keystrokes through a keyboard, a user can select the field and so to cause the system  10  to generate a change-of-setting pop-up window or menu  132 , as shown in  FIG. 16 . Once the user inputs a new setting, the change of setting is confirmed by the user using, for example, the GO key and/or other predetermined keys or keystrokes, which causes the updated setting to be stored with other settings in the memory  36 . Thereafter, the system  10  responds to the updated IOI setting as the current IOI setting. 
         [0086]    By entering a “BTP” command, a trader is then presented with a BTP stock price status screen shown in  FIG. 17 , which lists for the indicated stock the most recent activity of the stock such as orders for selling and buying in screen portions  116 - 118 , respectively, as well as best bids and best offers in screen portions  134 . Upon entering a predetermined command such as BTRN, the trader is then presented with an audit trail screen as shown in  FIG. 18 , in which any activity corresponding to the text at the screen portions  134  in  FIG. 17  are indicated, for example, in text messages  136  shown in  FIG. 18 . In particular, any IOIs associated with the orders in  FIG. 17  are displayed. 
         [0087]    In response to an IOI display command from a trader, such as IIA&lt;GO&gt;, the system  10  displays all IOI messages on an IOI screen shown in  FIG. 19 , with the IOI in  FIG. 18  associated with the buy order of 68.5 per share in  FIG. 17  being shown in more detail as the IOI  138  in  FIG. 19 . 
         [0088]    Unlike traditional broker-dealer IOIs in the prior art, the disclosed IOIs are fully executable and associated with the actual order. The IOIs are anonymous, and may be sent for both listed and over-the-counter stocks and only to institutions over both the “BLOOMBERG LP” and AUTEX systems. In one embodiment of the disclosed system  10  using the TRADEBOOK server  12  and applications, the only permissible way to enter and send an IOI is by entering an order to be associated with the IOI in the TRADEBOOK system. Accordingly, any user of the system  10  seeing an IOI knows that there is a real TRADEBOOK order attached to the IOI, and so the IOI is not being used for fishing for orders and trades. 
         [0089]    Such IOI functionality may only be available to the buy-side, so only the buy-side has the ability to view brokers&#39; IOIs. Using commands associated with TRADEBOOK such as broker:BTRD, users are allowed to view the available and posted IOIs, and so users of the system  10  may engage in trades using IOIs with confidence that the initiator is not fishing and wasting the users&#39; time. Thus the IOIs represent real liquidity which is immediately executable. 
         [0090]    The disclosed trading system  10  and method have been described by way of the preferred embodiment. However, numerous modifications and substitutions may be made without departing from the spirit of the invention. For example, while the preferred embodiment discusses trades complying with NASDAQ trading rules, it is wholly within the purview of the invention to contemplate negotiation and processing of trades under different market rules to ensure anonymity yet comply with the market rules in the manner as set forth above. Accordingly, the invention has been described by way of illustration rather than limitation.