Patent ID: 8751362

Claim:
A method for permitting a market maker to generate a buy order and a sell order, the method comprising: calculating, by at least one processor, a market price of a predetermined financial instrument based on at least one price for the financial instrument; determining, by the at least one processor, a sale reservation price increment for a sale of a predetermined quantity of the financial instrument, wherein the sale reservation price increment is calculated based on a predicted change in tracking error of a portfolio that would result from selling the predetermined quantity of the financial instrument; calculating, by the at least one processor, a sale reservation price by adding the sale reservation price increment to the market price; determining, by the at least one processor, a buy reservation price increment for a purchase of the predetermined quantity of the financial instrument, wherein the buy reservation price increment is calculated based on a predicted change in tracking error of the portfolio that would result from purchasing the predetermined quantity of the financial instrument; calculating, by the at least one processor, a buy reservation price by adding the buy reservation price increment to the market price; generating, by the at least one processor, a sell order for the financial instrument at the sale reservation price for the predetermined quantity; generating, by the at least one processor, a buy order for the financial instrument at the buy reservation price for the predetermined quantity; and posting, by the at least one processor, the buy order and the sell order to an electronic marketplace.