Detection of intra-firm matching and response thereto

Patent metadata

Field	Value
Publication number	US-11348173-B2
Application number	US-202016818648-A
Country	US
Kind code	B2
Filing date	Mar 13, 2020
Priority date	Nov 18, 2005
Publication date	May 31, 2022
Grant date	May 31, 2022

Abstract

The disclosed systems and methods relate to allowing trading of over the counter (“OTC”) foreign exchange (“FX”) contracts on a centralized matching and clearing mechanism, such as that of the Chicago Mercantile Exchange's (“CME”'s) futures exchange system (the “Exchange”). The disclosed systems and methods allow for anonymous transactions, centralized clearing, efficient settlement and the provision of risk management/credit screening mechanisms to lower risk, reduce transaction costs and improve the liquidity in the FX market place. In particular, the disclosed embodiments increase speed of execution facilitating growing demand for algorithmic trading, increased price transparency, lower cost of trading, customer to customer trading, and automated asset allocations, recurring trades as well as clearing and settlement efficiencies.

First claim

We claim:

1. A computer implemented method comprising:
receiving, by an intermediary via an electronic communication network, a first order from a first trading entity subsequent to receipt, via the electronic communication network, of a second order from a second trading entity, the second order having not previously been completely satisfied prior to receipt of the first order, wherein the first order comprises a first electronically encoded identifier identifying the first trading entity and the second order comprises a second electronically encoded identifier identifying the second trading entity, wherein the first and second electronically encoded identifiers are different;
prior to determining that any unsatisfied remainder of the first order is at least partially counter to another order received subsequent to the first order, establishing, by an order processor, that the first order is at least partially counter to the second order, and identifying, subsequent to the establishing by an identity identifier, that the first trading entity is not permitted to transact with the second trading entity by performing a logical computer program operation on the first and second electronically encoded identifiers based on an application of a rule which specifies a relationship which the first and second electronically encoded identifiers must satisfy resulting in a determination that at least a portion of the first electronically encoded identifier matches at least a portion of the second electronically encoded identifier; and
preventing, by a transaction processor coupled with the identity identifier, a matching engine of the intermediary from matching the first and second orders with each other when the first order is at least partially counter to the second order and the first trading entity is determined by the identity identifier to not be permitted to transact with the second trading entity.

2. The computer implemented method of claim 1 , wherein the first and second electronically encoded identifiers are encoded in a binary format.

3. The computer implemented method of claim 1 , wherein the first electronically encoded identifier comprises a concatenation of data identifying the first trading entity with data identifying the second trading entity and wherein the second electronically encoded identifier comprises a concatenation of data identifying the second trading entity with data identifying the first trading entity.

4. The computer implemented method of claim 1 , further comprising determining that the first order is at least partially counter to at least one other order previously received from another trading entity to which the first trading entity is determined by the identity identifier to be permitted to transact and, based thereon, allowing the matching engine to match the first order and the determined at least one other order, and making any unsatisfied remainder of the first order available to match against orders at least partially counter thereto subsequently received from other trading entities to which the first trading entity is determined by the identity identifier to be permitted to transact.

5. The computer implemented method of claim 1 , wherein the receiving, establishing, and preventing are performed without identifying the first trading entity to the second trading entity and wherein, upon previous transmission to the intermediary of the first order by the first trading entity, the transaction processor does not identify that the second order was submitted by the second trading entity to the first trading entity and the transaction processor does not identify that the first order was submitted by the first trading entity to the second trading entity.

6. The computer implemented method of claim 1 , wherein the first trading entity is related to a third trading entity and the second trading entity is related to a fourth trading entity, the identifying further comprising identifying that the first trading entity is not permitted to transact with the second trading entity based on a relationship between the third and fourth trading entities.

7. The computer implemented method of claim 1 , wherein the method further comprises determining, by the transaction processor, an action to take, the action comprising at least one of notifying, via the electronic communication network, the first and second trading entities of the relationship, canceling at least one of the first and second orders, allowing at least one the first and second orders to be matched to other orders but not to each other, or combinations thereof.

8. The computer implemented method of claim 7 , wherein the action varies based on time of day.

9. The computer implemented method of claim 1 , wherein the identifying further comprises identifying, by the identity identifier, the first and second trading entities as being related when the relationship comprises the first and second trading entities being at least part of a common trading entity, when the relationship comprises the first and second trading entities being the same trading entity, when the relationship comprises the first and second trading entities being contractually related to each other or when the relationship comprises a specification by one of the first and second trading entities of the other of the first and second trading entities.

10. The computer implemented method of claim 9 , wherein the relationship is encoded in the first and second electronically encoded identifiers.

11. A system comprising:
an order processor operative to receive via an electronic communication network a first order from a first trading entity subsequent to receipt via an electronic communication network of a second order from a second trading entity, the second order having not previously been completely satisfied prior to receipt of the first order, wherein the first order comprises a first electronically encoded identifier identifying the first trading entity and the second order comprises a second electronically encoded identifier identifying the second trading entity and, prior to a determination of whether any unsatisfied remainder of the first order is at least partially counter to another order received subsequent to the first order, establish that the first order is at least partially counter to the second order, wherein the first and second electronically encoded identifiers are different;
an identity identifier coupled with the order processor and operative to, prior to the determination of whether any unsatisfied remainder of the first order is at least partially counter to another order received subsequent to the first order, identify that the first trading entity is not permitted to transact with the second trading entity based on performance of a logical operation on the first and second electronically encoded identifiers based on an application of a rule which specifies a relationship which the first and second electronically encoded identifiers must satisfy to determine that at least a portion of the first electronically encoded identifier matches at least a portion of the second electronically encoded identifier; and
a transaction processor coupled with the identity identifier and operative to prevent a matching engine from matching the first and second orders with each other when the first order is at least partially counter to the second order and the first trading entity is determined by the identity identifier to not be permitted to transact with the second trading entity.

12. The system of claim 11 , wherein the first and second electronically encoded identifiers are encoded in a binary format.

13. The system of claim 1

Assignees

• Chicago Mercantile Exchange Inc

Inventors

• Bauerschmidt Paul Andrew
• Studnitzer Ari L
• Albert William J
• Callaway Paul J
• Farrell James W
• Thiruthuvadoss A Shanthi

Classifications

• G06Q40/03

  Credit; Loans; Processing thereof · CPC title

• G06Q20/381

  Currency conversion · CPC title

• G06Q40/02

  Banking, e.g. interest calculation or account maintenance (credit or loans G06Q40/03) · CPC title

• G06Q10/10

  Office automation; Time management · CPC title

• G06Q40/06

  Asset management; Financial planning or analysis · CPC title