Abstract:
Systems and methods for anonymous electronic trading that allow a trader to hide his or her identity and inhibit trading interactions are provided. Using these systems and methods, a trader can, using various trading interfaces, control a level of trading anonymously and configure warnings that are provided to protect against inadvertent completion of potential-risk-involved trades.

Description:
CROSS REFERENCE TO RELATED APPLICATION 
       [0001]    This application claims the benefit of U.S. Provisional Patent Application Ser. No. 60/223,028, filed Aug. 4, 2000, which is hereby incorporated by reference herein in its entirety. 
     
    
     BACKGROUND OF THE INVENTION 
       [0002]    The present invention relates to systems and methods for anonymous electronic trading. More particularly, the present invention relates to systems and methods for electronic trading that enable traders to remain anonymous with each other while still allowing those traders to monitor counterparty risk. 
         [0003]    In recent years, electronic trading systems have gained wide spread acceptance for trading of a wide variety of items, such as goods, services, financial instruments, and commodities. For example, electronic trading systems have been created which facilitate the trading of financial instruments and commodities such as stocks, bonds, currency, futures, oil, gold, pork bellies, etc. As another example, online auctions on the Internet have become popular markets for the exchange of services and both new and used goods. 
         [0004]    Many of these electronic trading systems use a bid/offer process in which bids and offers are submitted to the systems by a passive side and then those bids and offers are hit and lifted (or taken) by an aggressive side. For example, a passive trader may submit a “bid” to buy a particular number of 30 Year U.S. Treasury bonds at a given price. In response to such a bid, an aggressive side trader may submit a “hit” in order to indicate a willingness to sell bonds to the first trader at the given price. Alternatively, a passive side trader may submit an “offer” to sell the particular number of the bonds at the given price, and then an aggressive side trader may submit a “lift” (or “take”) in response to the offer to indicate a willingness to buy bonds from the passive side trader at the given price. In such trading systems, the bid, the offer, the hit, and the lift (or take) are collectively know as “orders”. Thus, when a trader submits a bid, the trader is said to be submitting an order. 
         [0005]    Given the laws of supply and demand, if a first trader desires to buy or sell an extraordinarily large size of a particular financial instrument or other item, other traders may modify their prices for that instrument or item to the detriment of the first trader in order to take advantage of that desire. In this way, the other traders may distort the market price of the instrument or item away from what the price would be for that instrument or item trading with the same size over varied buyers or sellers. Accordingly, traders frequently desire to remain anonymous when trading so that other traders cannot determine their identity prior to execution of any given trade. 
         [0006]    Although traders in electronic trading systems frequently desire to remain anonymous in this way, many traders still desire to be able to monitor counterparty risk by keeping track of and limiting the total size of trades that they are completing with each other trader. Accordingly, it is an object of the present invention to provide systems and methods for electronic trading that enable traders to remain anonymous with each other while still allowing those traders to monitor counterparty risk. 
       SUMMARY OF THE INVENTION 
       [0007]    In accordance with this and other objects of the invention, systems and methods are provided which enable traders to participate in anonymous trading while monitoring their counterparty risk. Monitoring of counterparty risk by a trader is facilitated by allowing the trader to set counterparty switches that indicate counterparties with which the trader does not want to trade, by allowing the trader to specify warning limits for those traders with which the trader does want to trade, and by allowing the trader to specify how over-warning-limit pending trades are to be processed. Once these selections have been made, display of order submissions entered by a counterparty is controlled in accordance with the counterparty switches entered by the counterparty and each trader to which the order submission would be displayed. For example, if the counterparty or a trader has selected to set the counterparty switch for the other party to “OFF,” a bid entered by the counterparty would be correspondingly displayed (e.g., in a special color), or not displayed at all, to the trader. Upon a pending trade being initiated by the trader in response to the order submission by the counterparty, the warning limits for the trader and the counterparty may then be checked to confirm that completion of the corresponding trade would not cause any warning limits to be exceeded. In the event that the trade would exceed one or more warning limits, then, based upon the trader&#39;s and the counterparty&#39;s specifications of how each party wants to process over-warning-limit pending trades, the trade may be automatically executed in full, automatically executed for only a within-warning-limit portion, automatically rejected, manually executed in full, or manually executed for only the within-warning-limit portion. Upon the occurrence of an over-warning-limit pending trade, each party trader may then be prompted to see if the trader wants to turn “OFF” the counterparty switch for the other trade and thereby control display of subsequent order submission by the other trader. 
         [0008]    Although the present invention is described herein as being used by “traders,” it should be apparent that the term “trader” is meant to broadly apply to any user of a trading system, whether that user is an agent acting on behalf of a principal, a principal, an individual, a legal entity (such as a corporation), etc., or any machine or mechanism that is capable of placing and/or responding to orders in a trading system. 
     
    
     
       BRIEF DESCRIPTION OF THE DRAWINGS 
         [0009]    Further features of the invention, its nature and various advantages will become more apparent from the following detailed description of the invention, taken in conjunction with the accompanying drawings, in which like reference characters refer to like parts throughout, and in which: 
           [0010]      FIG. 1  is a block diagram of one embodiment of hardware that may be used to implement the present invention; 
           [0011]      FIG. 2  is an illustration of a screen display that may be presented in accordance with one embodiment of the present invention; 
           [0012]      FIG. 3  is an illustration of an interface that may be presented in accordance with one embodiment of the present invention; 
           [0013]      FIG. 4  is a flow diagram of a process for configuring trader workstations and processing bids and offers in accordance with one embodiment of the present invention; 
           [0014]      FIGS. 5A-5C  are flow diagrams of a process for processing hits and lifts (or takes) and reconfiguring trader workstations in accordance with one embodiment of the present invention; 
           [0015]      FIG. 6  is an illustration of an interface that may be used to configure trader workstations in accordance with one embodiment of the present invention; 
           [0016]      FIG. 7  is an illustration of a prompt that may be used to manually execute a partial trade in accordance with one embodiment of the present invention; 
           [0017]      FIG. 8  is an illustration of a prompt that may be used to manually execute a full trade in accordance with one embodiment of the present invention; and 
           [0018]      FIG. 9  is an illustration of a prompt that may be used to reconfigure trader workstations in accordance with one embodiment of the present invention. 
       
    
    
     DETAILED DESCRIPTION OF THE INVENTION 
       [0019]    The present invention is now described in connection with  FIGS. 1-9 . Although the present invention is described below in connection with a bid/offer, hit/take trading system, it should be apparent to one of ordinary skill in the art that the control of the display of information, the monitoring of warning limits, and the prompting of a user regarding the subsequent display of the information in accordance with the present invention may be used with any other suitable trading, information display, and/or data processing system. 
         [0020]    Turning first to  FIG. 1 , an example of hardware  100  that may be used to implement one embodiment of the present invention is shown. As illustrated, hardware  100  may include one or more local workstations  102  and one or more remote workstations  104  that may be used by traders to view trading data and enter trading commands. Workstations  102  and  104  may be any suitable means for presenting data and, in preferred embodiments of this invention, accepting input. For example, workstations  102  and  104  may be personal computers, laptop computers, mainframe computers, dumb terminals, data displays, Internet browsers, Personal Digital Assistants (PDAs), two-way pagers, wireless terminals, portable telephones, etc., or any combination of the same. 
         [0021]    To orchestrate trading between traders using workstations  102  and  104 , the workstations preferably submit commands to, and receive data to be displayed from, a processor  106 . In alternative embodiments, however, workstations may communicate with additional processors, or include processors to orchestrate trading in a distributed fashion without requiring processor  106 . In yet other embodiments, processor  106  may be connected to an external trading system (not shown) that controls trading by the traders. Processor  106 , and any additional processors, may be any suitable circuitry or devices capable of processing data such as microprocessors, personal computers, network servers, mainframe computers, dedicated computer systems, etc. 
         [0022]    As shown, processor  106  may be connected to workstations  102  and  104  by networks  108  and  110 , respectively. Each of networks  108  and  110  may be any suitable data network for communicating data between workstations  102  and  104  and processor  106 , such as a local area network, a wide area network, the Internet, an intranet, a wireless network, a hard wired connection, a dial-up network, etc., or any combination of the same. In an arrangement of hardware  100  without processor  106 , workstations  102  and  104  may be linked together by networks  108  and  110  directly. 
         [0023]    As also shown in  FIG. 1 , a telephone network  120  may be provided that comprises a local telephone  122  and a remote telephone  124  connected by a telephone line  126 . Telephone network  120  may be used to enable a trader at a remote location to communicate with an operator at a workstation  102  or  104 . This may be useful when the trader does not have access to a workstation  102  or  104  or when the trader only has access to a display-only workstation  102  or  104 . Obviously, telephone network  120  may be implemented as a private telephone network, a public telephone network, a wireless telephone network, or any suitable combination of the same. 
         [0024]    When used to implement a bid/offer, hit/take trading system as described above or connect to an external bid/offer, hit/take trading system, hardware  100  may enable a trader to submit a bid to buy, or an offer to sell, an item at one of workstations  102  and  104 . This bid or offer may then be communicated to processor  106 , where the bid or offer can be ranked and stored in a bid-offer queue. The ranking may be based upon time of submission, price, or any other suitable criterion. The bid or offer may then be presented to other traders via other workstations  102  and  104  dependent upon its ranking in the bid-offer queue. Once displayed, the bid or offer can then be hit or taken by one or more of the other traders so that a trade of the item can proceed to execution. 
         [0025]    An example of a display  200  for presenting a bid and offer  201  to a trader is shown in  FIG. 2 . As illustrated, bid and offer  201  may include portions indicating a description of the underlying instrument  202 , a bid price  204 , an offer price  206 , a bid size  208 , and an offer size  210 . In accordance with the present invention, these portions of bid and offer  201  may be highlighted with one or more colors, or in any other suitable manner, to indicate various traits of the bid and offer. For example, portions  204  and  208  may be colored red to indicate that the counterparty switch of the bidder has been turned off by the trader and, thus, is not tradable by the trader. 
         [0026]    Turning to  FIG. 3 , an interface  300  is shown that may be used to submit and respond to bids and offers presented in display  200  in accordance with the present invention. Interface  300  may be presented on a trader&#39;s workstation in response to the trader clicking on any of portions  202 ,  204 ,  206 ,  208 , and  210  of bid and offer  201 . When presented, interface  300  may then indicate information about the bid and offer clicked-on by the trader in a display  301 . As shown, for example, upon the trader clicking on portion  204  of bid and offer  201 , interface  300  may be presented with the instrument “usg  05 Y” indicated in display  301 . Display  301  may also indicate the current bid price for the instrument (i.e., “99.12+”) and the current bid size for the instrument (i.e., “10”). 
         [0027]    As also shown in  FIG. 3 , a variety of buttons and entry fields may be incorporated into interface  300 . At the center of interface  300 , a numeric keypad  302  is displayed. As illustrated, numeric keypad  302  provides buttons for numbers zero through nine, ten, twenty-five, fifty, and one hundred. Numeric keypad  302  also contains a plus button (“+”), a minus button (“−”), a decimal point button (“.”), a backspace button (“BKS”), and a delete button (“DEL”). Interface  300  also provides a buy button  304 , a sell button  306 , a cancel buy button  308 , a cancel sells button  310 , a bid button  312 , an offer button  314 , a cancel bids button  316 , a cancel offers button  318 , cancel all buttons  320 , cancel all for all instruments buttons  322 , a price entry field  324 , price up and down buttons  326 , bid price up and down buttons  328 , offer price up and down buttons  334 , a size entry field  330 , and size up and down buttons  332 . 
         [0028]    In order to submit a bid or offer for the instrument indicated in display  301  using interface  300 , a trader may first set a bid or offer price and a bid or offer size by entering the appropriate values in fields  324  and  330 , respectively, using up and down buttons  326 ,  328 ,  332 , and/or  334  and/or using keypad  302 . Once the desired price and size for the bid or offer have been specified, the trader may then submit the bid or offer by pressing bid button  304  or the offer button  314 . 
         [0029]    In order to hit a bid or lift (or take) an offer for the instrument indicated in display  301  using interface  300 , a trader may first specify a size in field  330  using up and down buttons  332  and/or  334  and/or using keypad  302 . Once the desired size has been specified, the trader may then hit the bid or lift (or take) the offer for the specified size by pressing sell button  306  or buy button  304 , respectively. 
         [0030]    In the event that a trader desires to cancel a bid, an offer, a hit, or a lift (or take), the trader may press any corresponding one of buttons  308 ,  310 ,  316 ,  318 ,  320 , and  322 . 
         [0031]    Turning to  FIG. 4 , a process  400  for configuring a workstation  102  and  104  ( FIG. 1 ) and processing bids and offers that may be executed in processor  106  ( FIG. 1 ) in accordance with one embodiment of the present invention is shown. As illustrated at step  402 , process  400  first allows a trader to select how the workstation is to react when a bid or offer is hit or lifted, respectively, and execution of that trade would exceed a warning limit of one of the traders in the trade. The workstation may be configured to automatically accept the full trade, automatically accept only the part of the trade that would not exceed the warning limits of both traders, automatically reject the whole trade, manually accept the full trade after prompting the trader, or manually accept only the part of the trade that would not exceed the warning limits of both traders after prompting the trader. As indicated in  FIG. 4 , the options of manually accepting the full trade and manually accepting only part of the trade may not be available at workstations  102  or  104  in order to speed trading, simplify trading, or limit decision making by traders with respect to counterparty risk. Alternatively, the manual options may be available and the automatic options may not be available in some embodiments of the invention. 
         [0032]    Referring to  FIG. 6 , an example of an interface  600  that facilitates selection of one of these options is shown. As illustrated, by selecting one of the options from drop-down menu  602 , a trader can select how the workstation is to react when execution of a trade would exceed a warning limit of at least one of the traders. Although this selection is shown in interface  600  as being made by selecting one of the options from drop-down menu  602 , selection of one of these options may be made in any suitable manner. 
         [0033]    Turning back to  FIG. 4 , process  400  next enables each trader to set counterparty switches for the other traders at step  404 . These counterparty switches enable a trader to indicate whether the trader wants to be able to trade with each other trader. A trader may indicate that the trader does not want to trade with another trader, for example, because the other trader backed out of a trade on a previous occasion, because the other trader trades only in small sizes, or for any other suitable reason. 
         [0034]    As can be seen in  FIG. 6 , a trader trading at a workstation  102  or  104  on behalf of Institution A may select whether to trade with counterparty institutions by selecting which of check boxes  604 ,  606 ,  608 ,  610 , and  612  to check. Where a check box is checked, the corresponding institution is preferably set to “ON” so that bids and offers from that institution are presented to the trader. 
         [0035]    As shown in  FIG. 4 , once a trader has set the counterparty switches for the other traders, the trader at step  406  may optionally set warning limits for each counterparty having a counterparty switch that is set to “ON.” Through interface  600  of  FIG. 6 , for example, the trader may set warning limits by specifying values in fields  614 ,  616 ,  618 ,  620 ,  622 ,  624 ,  626 ,  628 ,  630 , and/or  632 . These values may be a total dollar amount of buy and sell side transactions, a total dollar amount of buy side only transactions, a total dollar amount of sell side only transactions, a count of the total number of buy and sell side transactions, a count of the total number of buy side only transactions, a count of the total number of sell side only transactions, any other suitable values or combinations of values that are related to order submission of the counterparty and/or any other characteristic of the trader, or any other suitable values or combinations of values that are independent of order submissions of the counterparty and any other characteristic of the trader. Although interface  600  is illustrated with fields  614 ,  616 ,  618 ,  620  and  622  in a buy column  634  and fields  624 ,  626 ,  628 ,  630 , and  632  in a sell column  636 , the present invention may be implemented with only a single column for total buy and sell transactions or for only one of buy and sell transactions. 
         [0036]    Although steps  402 ,  404  and  406  are illustrated in process  400  of  FIG. 4  in a specific order, these steps may be executed in any suitable order or in parallel if desired. 
         [0037]    After a trader has specified warning limits at step  406  of  FIG. 4 , process  400  next waits for new bids and offers to be entered at step  408 . As explained above, bids and offers may be entered at workstations  102  or  104  using an interface  300  as illustrated in and described in connection with  FIG. 3 . Once a new bid or offer has been entered, process  400  next receives the bid or offer at step  410 . At step  412 , process  400  then determines whether the counterparty switches both to and from the passive side (i.e., the counterparty submitting the bid or offer that was received at step  410 ) are set to “ON.” If both the counterparty switches to and from the passive side are set to “ON,” process  400  then displays the bid or offer as available (i.e., a bid or offer that the trader may hit or take (or lift)) at step  414 . Otherwise, process  400  displays the bid or offer as not available or does not display the bid or offer at all at step  416 . A bid or offer may be displayed as being available or not available by displaying the bid or offer in a corresponding color (e.g., available bids or offers in green and unavailable bids or offers in red), by displaying the bid or offer in a corresponding font (e.g., available bids or offers in bold and unavailable bids or offers in italics), by flashing or not flashing the bid or offer (e.g., available bids or offers flashing and unavailable bids or offers/not flashing), by only displaying a bid or offer if it is available, or in any other suitable manner. 
         [0038]    Turning now to  FIGS. 5A-5C , a process  500  for processing hits and lifts (or takes) in response to available bids and offers that may be executed in processor  106  ( FIG. 1 ) in accordance with preferred embodiments of the present invention is shown. As explained above, hits and lifts (or takes) may be entered using interface  300  illustrated in and discussed in connection with  FIG. 3 , for example. Process  500  begins by waiting for a hit or lift (or take) to be entered on an available bid or offer at step  504 . Once a hit or lift is received, process  500  receives the new hit or lift at step  506 . The bid or offer for which the hit or lift was received is then set to inactive at step  508 . The bid or offer is set to inactive in order to prevent the bid or offer from being hit or lifted by another trader while process  400  is determining whether execution of the trade corresponding to the hit or lift of the bid or offer can be executed. 
         [0039]    Next, at step  510 , process  500  checks the warning limits for each of the traders in the trade. In the case where both a buy side warning limit and a sell side warning limit is specified by a trader, step  510  will first select the appropriate limit for each trader. For example, if a trader A hits a bid by a trader B, and traders A and B both set up both a buy side warning limit and a sell side warning limit, for trader A, the sell side warning limit will be checked and for trader B, the buy side warning limit will be checked. In the event where no sell side warning limit has been set and a trader has hit a bid, or vice versa, the trade may be treated as exceeding the warning limit check or as not exceeding the warning limit check, as desired. 
         [0040]    If the trade would not exceed the warning limit of either trader, at step  512 , process  500  branches to step  516  to execute the trade and then loop back to step  504 . Otherwise, if the trade would exceed the warning limit of either trader, process  500  proceeds to step  520  ( FIG. 5B ) via links  514  and  518  ( FIG. 5B ). 
         [0041]    At step  520 , process  500  then determines if either trader selected automatic rejection of the whole trade in configuring workstations  102  and  104 . If either trader did select automatic rejection, then process  500  takes the AR branch and restores the bid or offer to active at step  522  so that the bid or offer may be acted upon by other traders. Once a bid or offer has been restored to active at step  522 , process  500  then proceeds to step  548  ( FIG. 5C ) via links  524  and  546  ( FIG. 5C ). 
         [0042]    If neither trader is configured for automatic rejection, then process  500  determines at step  526  whether both traders selected automatic acceptance of only part of the trade, or whether one trader selected automatic acceptance of only part of the trade and the other trader selected automatic acceptance of the full trade. If not, process  500  proceeds to step  532 . If so, process  500  takes the AP branch and at step  528  then splits the bid or offer into a bid or offer for the size that would not exceed either warning limit and a bid or offer for the remaining size. Process  500  then executes the bid or offer for the size that would not exceed the warning limit at step  530 , and proceeds to step  548  ( FIG. 5C ) via links  524  and  546  ( FIG. 5C ). 
         [0043]    At step  532 , process  500  inquires whether both traders are configured for automatic acceptance of the full trade. If so, process  500  then takes the AF branch and executes the trade at step  530  and proceeds to step  548  ( FIG. 5C ) via links  524  and  546  (FIG. SC). Otherwise, process  500  proceeds to step  534 . 
         [0044]    At step  534 , process  500  determines whether either trader is configured for manual acceptance of only part of the trade or whether one trader is configured for automatic acceptance of only part of the trade and the other trader is configured for manual acceptance of the full trade. If yes, then process  500  takes the MP branch and proceeds to step  536  whereupon each trader that is configured for manual acceptance of either only part of the trade or the full trade is asked whether that trader would like to execute a partial trade. Such an inquiry may be made by presenting a prompt  700  as shown in  FIG. 7 . In response to this prompt, the trader may select one of “YES” button  702  or “NO” button  704 . In the event that a prompted trader does not respond to prompt  700  within a given period of time, prompt  700  may automatically select one of button  702  and button  704  in order to prevent excessive delays in trading. 
         [0045]    Next, at step  538 , process  500  determines whether each trader prompted at step  536  elected to execute a partial trade. If so, then process  500  branches to step  528  and performs that step and the subsequent steps in process  500  as described above. Otherwise process  500  branches to step  522  and performs that step and the subsequent steps in process  500  as described above. 
         [0046]    If process  500  determines at step  534  that neither trader is configured for manual acceptance of only part of the trade and that one trader is not configured for automatic execution of only part of the trade and/or the other trader is not configured for manual acceptance of the full trade, then process  500  takes the MF branch and proceeds to step  540  whereupon each trader configured for manual acceptance of the full trade is asked whether that trader would like to execute the full trade. Such an inquiry may be made by presenting a prompt  800  as shown in  FIG. 8 . In response to this prompt, the trader may select one of “YES” button  802  or “NO” button  804 . Like prompt  700 , in the event that a trader does not respond to prompt  800  within a given period of time, prompt  800  may automatically select one of button  802  and button  804  in order to prevent excessive delays in trading. 
         [0047]    Next, at step  544 , process  500  then determines whether each trader prompted at step  540  elected to execute the full trade. If so, process branches to step  530  and performs that step and the subsequent steps in process  500  as described above. Otherwise, process  544  branches to step  522  and performs that step and the subsequent steps in process  500  as described above. 
         [0048]    Although  FIG. 5B  illustrates a process  500  that tests for and processes automatic rejection (AR), automatic partial acceptance (AP), automatic full acceptance (AF), manual partial acceptance (MP), and manual full acceptance (MP), the present invention may be implemented without testing for these configuration selections and only perform tests, and subsequent processes, for configuration selections that are available. 
         [0049]    Upon completing either step  522  or step  530 , process  500  proceeds to step  548  ( FIG. 5C ) via links  524  and  546  ( FIG. 5C ) and then displays a prompt asking the passive side trader if that trader would like to turn off the counterparty switch for the current counterparty (the aggressor). Such an inquiry may be made by presenting the passive side trader with a prompt  900  as shown in  FIG. 9 . In response to this prompt the passive side trader may select one of “YES” button  902  and “NO” button  904 . If the passive side trader fails to respond to prompt  900  within a given period of time, prompt  900  may automatically select one of button  902  and button  904  in order to prevent excessive delays in trading. 
         [0050]    Referring back to  FIG. 50 , after performing step  548 , process  500  then determines at step  550  whether the passive side trader elected to turn “OFF” the counterparty switch at step  548 . If so, then process  500  turns “OFF” the corresponding counterparty switch at step  552 . Once the switch has been turned “OFF” at step  552  or if the passive side trader did not elect to turn off the counterparty switch, then process  500  displays a prompt to the aggressive side trader asking whether the aggressive side trader would like to turn “OFF” the counterparty switch corresponding to the passive side trader. This prompt may be presented using prompt  900  of  FIG. 9  similarly to the manner described above. If the aggressive side trader elected to turn “OFF” the passive side trader at step  554 , process  500 , at step  556 , branches to step  558  whereupon the corresponding counterparty switch is set to “OFF.” Otherwise process  500  loops back to step  504  ( FIG. 5A ) via links  560  and  502  ( FIG. 5A ). 
         [0051]    Those skilled in the art will appreciate that the present invention can be practiced by other than the described embodiments, which are presented for purposes of illustration and not of limitation, and the present invention is limited only by the claims.