System and method for real-time options trading over a global computer network

Abstract

The present invention relates to a method and system for electronically trading a financial instrument. The method includes entering a bid order for the financial instrument and placing the bid order in a bid queue associated with a buyer who maintains a list of sellers to sell the financial instrument to. Then, entering an ask order for the financial instrument and placing the ask order in an ask queue associated with a seller who maintains a list of buyers to buy the financial instrument from. Next, the present invention will match the bid order and the ask order and to execute a trade between the buyer and the seller. Lastly, the trade is executed if the bid order is not less than the ask order, and if the buyer is on the list of buyers and the seller is on the list of sellers.

1 . A method for electronically trading a financial instrument, comprising the steps of: 
 selecting, by a buyer, a list of sellers to sell the financial instrument to;    selecting, by a seller, a list of buyers to buy the financial instrument from;    receiving, at a server, a bid order for the financial instrument and placing the bid order in a bid queue associated with the buyer;    receiving, at the server, an ask order for the financial instrument and placing the ask order in an ask queue associated with the seller;    matching the bid order and the ask order to execute a trade between the buyer and the seller;    verifying that the buyer is on the list of buyers;    verifying that the seller is on the list of sellers; and    executing the trade if a price of the bid order is not less than a price of the ask order, and if the buyer is on the list of buyers and the seller is on the list of sellers.    
   
   
       2 . The method of  claim 1 , further comprising matching a next bid order in the bid queue and the ask order if the buyer is not on the list of buyers or the seller is not on the list of sellers.  
   
   
       3 . The method of  claim 1 , further comprising matching a next ask order in the ask queue and the bid order if the buyer is not on the list of buyers or the seller is not on the list of sellers.  
   
   
       4 . The method of  claim 1 , further comprising matching a next bid order in the bid queue and a next ask order in the ask queue if a price of the ask order is greater than a price of the bid order.  
   
   
       5 . The method of  claim 1 , further comprising electronically screening sellers and buyers such that only acceptable sellers are placed on the list of sellers and acceptable buyers are placed on the list of buyers.  
   
   
       6 . The method of  claim 1 , wherein neither the bid order nor the ask order is removed from the bid queue or the ask queue, respectively, if there is no match.  
   
   
       7 . The method of  claim 1 , further comprising activating a virtual button on a display screen to immediately cancel every bid order or ask order of one of the buyer and the seller.  
   
   
       8 . A system for electronically trading a financial instrument, comprising: 
 a memory storage for storing machine-readable instructions; and    a processor programmable to execute the machine-readable instructions retrieved from the memory storage for:    a) receiving, from a buyer, a list of sellers to sell the financial instrument to;    b) receiving, from a seller, a list of buyers to buy the financial instrument from;    c) entering a bid order for the financial instrument and placing the bid order in a bid queue associated with the buyer;    d) entering an ask order for the financial instrument and placing the ask order in an ask queue associated with the seller;    e) matching the bid order and the ask order to execute a trade between the buyer and the seller;    f) verifying that the buyer is on the list of buyers;    g) verifying that the seller is on the list of sellers; and    h) executing the trade if a price of the bid order is not less than a price of the ask order, and if the buyer is on the list of buyers and the seller is on the list of sellers.    
   
   
       9 . The system of  claim 8 , wherein a next bid order in the bid queue is matched with the ask order if the buyer is not on the list of buyers or the seller is not on the list of sellers.  
   
   
       10 . The system of  claim 8 , wherein a next ask order in the ask queue is matched with the bid order if the buyer is not on the list of buyers or the seller is not on the list of sellers.  
   
   
       11 . The system of  claim 8 , wherein a next bid order in the bid queue is matched with a next ask order in the ask queue if a price of the ask order is greater than a price of the bid order.  
   
   
       12 . The system of  claim 8 , wherein sellers and buyers are screened electronically such that only acceptable sellers are placed on the list of sellers and acceptable buyers are placed on the list of buyers.  
   
   
       13 . The system of  claim 8 , wherein neither the bid order nor the ask order is removed from the bid queue or the ask queue, respectively, if there is no match.  
   
   
       14 . The system of  claim 8 , wherein a virtual button is activated on a display screen to immediately cancel every bid order or ask order of one of the buyer and the seller.  
   
   
       15 . A method for electronically trading a financial instrument, comprising the steps of: 
 compiling a counterparty list of one or more traders from a plurality of traders;    receiving a bid price for a financial instrument from a first trader;    receiving an offer price for the financial instrument from a second trader;    verifying that both the first trader and the second trader are on the counterparty list;    matching the bid price to the offer price; and    executing the trade if the bid price equals the offer price and both the first and second traders are on the counterparty list.    
   
   
       16 . The method of  claim 15 , wherein the compiling step comprises the steps of: 
 receiving from the first trader a first trader counterparty list; and    receiving from the second party a second trader counterparty list; and    wherein the verifying step comprises the steps of:    verifying that the second trader is on the first trader counterparty list; and    verifying that the first trader is on the second trader counterparty list.