Abstract:
Methods and systems are providing for minimizing the effects of transmission delays when providing orders for financial instruments. A plurality of order books and match engines may be maintained at geographically dispersed locations. The orders may be synchronized to provide the appearance of a single order book to traders and other users. The plurality of order books and match engines allow traders and other users to transmit orders to the match engine associated with the shortest transmission delay and to access orders pending at other match engines.

Description:
[0001]    The present application is a continuation of U.S. patent application Ser. No. 12/841,781, filed Jul. 22, 2010, which is a continuation of U.S. patent application Ser. No. 11/183,393, filed Jul. 18, 2005, which claims the benefit of priority to U.S. Provisional Application No. 60/661,144, filed Mar. 11, 2005. All three aforementioned applications are hereby incorporated by reference in their entirety. 
     
    
     FIELD OF THE INVENTION 
       [0002]    The present invention relates to the trading of financial instruments and, in particular, to methods and systems that utilize orders that are geographically distributed. 
       DESCRIPTION OF THE RELATED ART 
       [0003]    Modern financial instrument trading systems allow traders to transmit orders great distances to match engines. For example, it is common for traders in London and Singapore to transmit orders for options and futures contracts to a match engine located in the United States. When using computer devices and automated trading systems, traders located at greater distances from a match engine can be at a competitive disadvantage when compared to traders located shorter distances from the match engine. 
         [0004]    Traders located farther away from a match engine are disadvantaged because of the time required to receive market data from the match engine and transmit orders to the match engine. For example, a trader located in London can expect an order transmitted in London to arrive at a match engine located in Chicago in about 80 milliseconds. This delay can be significant for traders using computer devices and automated trading systems that place orders in response to changes in market data. If an automated trading system located in Chicago and an automated trading system located in London respond to the same market data and transmit the same order to a match engine located in Chicago, one skilled in the art would expect the order generated by the automated trading system located in Chicago to arrive at the match engine before the order generated by the automated trading system located in London because of transmission delay. With existing systems, a trader&#39;s geographic location can cause a trader to always be at a competitive disadvantage because of transmission delays. 
         [0005]    Therefore, there is a need in the art for trading systems and methods that minimize delays associated with the transmission of trades and market data. 
       SUMMARY OF THE INVENTION 
       [0006]    Aspects of the present invention overcome problems and limitations of the prior art by providing synchronized order books that are located at geographically remote locations. The order books may be connected by a high speed data network and may exchange status messages. As used herein, a match engine or match engine module may be in the form of an instance of a match engine or match engine module. 
         [0007]    In certain embodiments, the present invention can be partially or wholly implemented on a computer-readable medium, for example, by storing computer-executable instructions or modules, or by utilizing computer-readable data structures. Of course, the methods and systems of the above-referenced embodiments may also include other additional elements, steps, computer-executable instructions, or computer-readable data structures. In this regard, other embodiments are disclosed and claimed herein as well. 
         [0008]    Aspects of the invention allow for the matching for a single highly active contract in a massively parallel environment. Blade servers and grid computing can be used to create a highly scalable matching environment. 
         [0009]    The details of these and other embodiments of the present invention are set forth in the accompanying drawings and the description below. Other features and advantages of the invention will be apparent from the description and drawings, and from the claims. 
     
    
     
       BRIEF DESCRIPTION OF THE DRAWINGS 
         [0010]    The present invention may take physical form in certain parts and steps, embodiments of which will be described in detail in the following description and illustrated in the accompanying drawings that form a part hereof, wherein: 
           [0011]      FIG. 1  illustrates a computer network system that may be used to implement aspects of the present invention; 
           [0012]      FIG. 2  illustrates a distributed order book system in accordance with an embodiment of the invention; 
           [0013]      FIG. 3  illustrates a method of processing an order at a local match engine in accordance with an embodiment of the invention; 
           [0014]      FIG. 4  shows the type of data that may be included in an order and in minimal order information, in accordance with an embodiment of the invention; and 
           [0015]      FIG. 5  illustrates a financial instrument order matching system that utilizes a shared memory in accordance with an embodiment of the invention. 
       
    
    
     DETAILED DESCRIPTION OF THE INVENTION 
       [0016]    Aspects of the present invention may be implemented with computer devices and computer networks that allow traders, exchanges and other entities to exchange trading data, such as orders and market information. An exemplary trading network environment for implementing trading systems and methods is shown in  FIG. 1 . An exchange computer system  100  receives orders and transmits market data related to orders and trades to users. Exchange computer system  100  may be implemented with one or more mainframe, desktop or other computers. A user database  102  includes information identifying traders and other users of exchange computer system  100 . Data may include user names and passwords potentially with other information to identify users uniquely or collectively. An account data module  104  may process account information that may be used during trades. A match engine module  106  is included to match bid and offer prices. Match engine module  106  may be implemented with software that executes one or more algorithms for matching bids and offers. A trade database  108  may be included to store information identifying trades and descriptions of trades. In particular, a trade database may store information identifying the time that a trade took place and the contract price. An order book module  110  may be included to compute or otherwise determine current bid and offer prices. A market data module  112  may be included to collect market data and prepare the data for transmission to users. A risk management module  134  may be included to compute and determine a user&#39;s risk utilization in relation to the user&#39;s defined risk thresholds. An order processing module  136  may be included to decompose variable defined derivative product and aggregate order types for processing by order book module  110  and match engine module  106 . 
         [0017]    The trading network environment shown in  FIG. 1  includes computer devices  114 ,  116 ,  118 ,  120  and  122 . Each computer device includes a central processor that controls the overall operation of the computer and a system bus that connects the central processor to one or more conventional components, such as a network card or modem. Each computer device may also include a variety of interface units and drives for reading and writing data or files. Depending on the type of computer device, a user can interact with the computer with a keyboard, pointing device, microphone, pen device or other input device. 
         [0018]    Computer device  114  is shown directly connected to exchange computer system  100 . Exchange computer system  100  and computer device  114  may be connected via a telecommunications line, a common local area network (LAN) or other mechanism for connecting computer devices. Computer device  114  is shown connected to a radio  132 . The user of radio  132  may be a trader or exchange employee. The radio user may transmit orders or other information to a user of computer device  114 . The user of computer device  114  may then transmit the trade or other information to exchange computer system  100 . 
         [0019]    Computer devices  116  and  118  are coupled to a LAN  124 . LAN  124  may have one or more of the well-known LAN topologies and may use a variety of different protocols, such as Ethernet. Computers  116  and  118  may communicate with each other and other computers and devices connected to LAN  124 . Computers and other devices may be connected to LAN  124  via twisted pair wires, coaxial cable, fiber optics or other media. Alternatively, a wireless personal digital assistant device (PDA)  122  may communicate with LAN  124  or the Internet  126  via radio waves. PDA  122  may also communicate with exchange computer system  100  via a conventional wireless hub  128 . As used herein, a PDA includes mobile telephones and other wireless devices that communicate with a network via radio waves. 
         [0020]      FIG. 1  also shows LAN  124  connected to the Internet  126 . LAN  124  may include a router to connect LAN  124  to the Internet  126 . Computer device  120  is shown connected directly to the Internet  126 . The connection may be via a modem, DSL line, satellite dish or any other device for connecting a computer device to the Internet. 
         [0021]    One or more market makers  130  may maintain a market by providing bid and offer prices for a derivative or security to exchange computer system  100 . Exchange computer system  100  may also exchange information with other trade engines, such as trade engine  138 . One skilled in the art will appreciate that numerous additional computers and systems may be coupled to exchange computer system  100 . Such computers and systems may include clearing, regulatory and fee systems. Coupling can be direct as described or any other method described herein. 
         [0022]    The operations of computer devices and systems shown in  FIG. 1  may be controlled by computer-executable instructions stored on computer-readable media. For example, computer device  116  may include computer-executable instructions for receiving order information from a user and transmitting that order information to exchange computer system  100 . In another example, computer device  118  may include computer-executable instructions for receiving market data from exchange computer system  100  and displaying that information to a user. 
         [0023]    Of course, numerous additional servers, computers, handheld devices, personal digital assistants, telephones and other devices may also be connected to exchange computer system  100 . Moreover, one skilled in the art will appreciate that the topology shown in  FIG. 1  is merely an example and that the components shown in  FIG. 1  may be connected by numerous alternative topologies. 
         [0024]      FIG. 2  illustrates a distributed order book system in accordance with an embodiment of the invention. A group of match engines  202 ,  204  and  206  are located at different locations. The locations may be remote from one another. For example, match engine  202  may be located in Chicago, match engine  204  may be located in London and match engine  206  may be located in Singapore. Each match engine may also be associated with an order book, such as order books  208 ,  210  and  212 . Match engines  202 ,  204  and  206  may be connected by a high speed data network, such as a fiber optic data network. A high speed data network facilitates the exchange of status messages  214  between match engines  202 ,  204  and  206  that may be used to synchronize order books  208 ,  210  and  212 . 
         [0025]    Status message  214  may be formatted in accordance with an efficient messaging protocol. In some embodiments of the invention, the messaging protocol may use out of band signaling. Status message  214  may include the best bid and offer available at a match engine, the state of a match engine, changes made since a previous status message or other information that allows a match engine to know the state of another match engine. Status messages allow, for example, a first match engine to match a first order with a second order at a second match engine when the second match engine provides a better price. 
         [0026]    In one embodiment of the invention an order may be matched locally at a match engine when there is not a price advantage associated with matching the order at another match engine. When an order is not matched locally, minimal order data  216  may be transmitted to one or more remote match engines so that all match engines are aware of all pending orders. Minimal order information is described in detail below. In one embodiment of the invention, minimal order information is used to synchronize match engines and status messages are not needed or used to check the integrity of data. 
         [0027]    As is shown in  FIG. 2 , computer devices  218   a - 218   e  may be coupled to match engines directly, via the Internet  220 , via a local area network (LAN)  222 . Additional communication paths may utilize other wide area networks (WANs), radio waves, mobile terminal networks, etc. Moreover, computer devices  218   a - 218   e  may be implemented with computer workstations, laptop computers, mobile terminals, phone devices, PDAs and other devices that allow users to exchange information with a match engine. Computer devices  218   a - 218   e  may be used to transmit orders to match engines and to receive market data, confirmation of trades and other information typically distributed by a match engine or exchange. 
         [0028]      FIG. 3  illustrates a method of processing an order at a local match engine in accordance with an embodiment of the invention. In step  302  an order is received at a local match engine. A match engine may be considered to be a “local” match engine when the match engine is the shortest geographic distance to the source of an order. In an alternative embodiment of the invention, a match engine may be considered to be “local” when the transmission time for transmitting an order from a source to the match engine is the shortest time. Next, in step  304 , it is determined whether the best available price is offered at the local match engine. Status messages described above allow a match engine to know the prices offered at other match engines. 
         [0029]    If the best price is available at the local match engine, in step  306  it may be determined whether the order matches a best price. When the order does match a best price, in step  308 , the order is matched at the local match engine. When the order does not match a best price, minimal order information may be transmitted to a remote match engine in step  310 . Of course, step  310  may include transmitting minimal order information to two or more remote match engines when the method shown in  FIG. 3  is used with systems that include three or more match engines. 
         [0030]    In step  312  it is determined whether the best available price is offered at a remote match engine. When the best available price is not offered at a remote match engine, the method proceeds to step  310 . When the best available price is offered at a remote match engine, in step  314  it is determined whether the order matches a best price. When the order does match a best price, the order is matched with an order at the remote match engine in step  316 . Step  316  may be performed at the local match engine. When the order does not match a best price, the process proceeds to step  310 . 
         [0031]    While  FIG. 3  illustrates a method in which match decisions are based on price, in alternative embodiments match decisions may be based on other variables, combination of variables or other factors. For example, a contractual obligation to distribute orders to market makers may impact the match decisions. 
         [0032]    The method shown in  FIG. 2  allows orders to be matched locally when possible. Orders are more likely to be matched locally with highly liquid markets. One skilled in the art will appreciate that modifications can be made to the method shown while maintaining the appearance of a single order book to traders and other users and minimizing transmission delays without departing from the invention. 
         [0033]      FIG. 4  shows the type of data that may be included in an order  402  that is transmitted from a trader  404  to a local match engine  406  and in a minimal order  408  transmitted from a local match engine  406  to remote match engines  410  and  412 . Order  402  may include a trader&#39;s name, trading firm name, account number, contract, price and quantity. Minimal order information  408  may include identifying information that uniquely identifies the order, such as a serial number, contract price and quantity. The use of minimal order information allows for the transmission of critical information between match engines while minimizing the consumption of bandwidth. During the execution of an order, the serial number or other identifying information may be used to obtain information that is included in an order, but not within minimal order information. 
         [0034]      FIG. 5  illustrates a financial instrument order matching system in accordance with an alternative embodiment of the invention. A shared memory  502  may be used to store order data  504 . Instead of storing order data locally, match engines  506 ,  508  and  510 , which may be geographically remote from one another, utilize order data  504  stored in shared memory  502 . 
         [0035]    One skilled in the art will appreciate that one or more reservation systems may be used to ensure that a single order is not matched more than once with the various embodiments described above. For example, if a match engine in Chicago is executing a process of matching a specific order, information identifying the state of the order may be distributed to match engines in London and Singapore to ensure that the later match engines do not attempt to match the order. 
         [0036]    The present invention has been described herein with reference to specific exemplary embodiments thereof. It will be apparent to those skilled in the art that a person understanding this invention may conceive of changes or other embodiments or variations, which utilize the principles of this invention without departing from the broader spirit and scope of the invention as set forth in the appended exemplary aspects of the invention. All are considered within the sphere, spirit, and scope of the invention.