Transformation of a Multi-Leg Security Definition for Calculation of Implied Orders in an Electronic Trading System

Abstract

An electronic trading system utilizes a Match Engine that receives orders, stores them internally, calculates tradable combinations and advertises the availability of real and implied orders in the form of market data. New tradable items defined as combinations of other tradable items may be included in the calculation of tradable combinations. A technique is disclosed for transforming a combination or strategy contract with an arbitrary number of buy and sell legs with an arbitrary volume ratio for each leg into a form that can be used for rapid implied order calculations.

What is claimed is: 
     
         1 . A computer implemented method of identifying, for an order for a strategy comprising a combination of interrelated orders for one or more outright contracts, a plurality of individual orders which, in combination, is counter to the order for the strategy, the method comprising:
 receiving, by a processor, the order for the strategy, the strategy comprising at least one order to buy and at least one order to sell, each of the at least one order to buy and at least one order to sell being for an associated quantity of at least one item of a plurality of items tradeable on an exchange, wherein the associated quantities of any of the at least one order to buy and the at least one order to sell may be different from another of the at least one order to buy and the at least one order to sell;   converting, by the processor, the at least one order to buy and the at least one order to sell into a set of unit orders comprising a separate buy order for each of the associated quantity of each of the at least one order to buy and a separate sell order for each of the associated quantity of each of the at leas tone order to sell, and further identifying, within the set of unit orders, one or more unique sets of unique spread orders, each unique spread order comprising a unique combination of one of the separate buy orders and one of the separate sell orders, each unique set of unique spread orders further comprising a synthetic spread order for each of the separate buy order or separate sell orders not otherwise included in a unique spread order of that unique set of unique spread orders;   determining, by the processor, the relationships between each of the interrelated orders of the combination of the strategy; and   computing, by the processor, the plurality of individual orders which, if placed in combination, are counter to the order for the strategy based on the determined relationships and each of the unique sets of unique spread orders and synthetic orders.   
     
     
         2 . The computer implemented method of  claim 1  wherein the converting further comprises:
 for each of the at least one buy order for a quantity of more than one unit, converting, by the processor, the buy order into a separate buy order for each unit of the quantity, the unit order set comprising any remaining buy orders which are for a quantity of only one unit and the separate buy orders; and 
 for each of the at least one sell order for a quantity of more than one unit, converting, by the processor, the sell order into a separate sell order for each unit of the quantity, the unit order set further comprising any remaining sell orders which are for a quantity of only one unit and the separate sell orders. 
 
     
     
         3 . The computer implemented method of  claim 1  wherein the identifying further comprises:
 ordering, by the processor, the separate sell orders of the set of unit orders in a first sequence; 
 selecting, by the processor one at a time, each of the separate buy orders of the set of unit orders, ordering the separate buy orders of the set of unit orders in a second sequence beginning with the selected separate buy order, and, for one of the one or more unique sets of unique spread orders for which a unique spread order has not yet been generated, generating, by the processor for each buy order in order of the second sequence for which a unique spread order does not already include a pairing thereof, a unique spread order comprising a pairing of the buy order with an unpaired sell order in order of the first sequence, and wherein for each remaining unpaired buy order, generating a synthetic spread order comprising a pairing thereof with a virtual sell order and for each remaining unpaired sell order, generating, by the processor, a synthetic spread order comprising a pairing thereof with a virtual buy order; and 
 comparing, by the processor, each of the one or more unique sets of unique spread orders to another of the one or more unique sets of unique spread orders and removing the other of the one or more unique sets of unique spread orders if the other of the one or more unique sets of unique spread orders is substantially equivalent thereto, each of the remaining one or more unique sets of unique spread orders being unique. 
 
     
     
         4 . The computer implemented method of  claim 3  wherein, for the purpose of determining equivalence among the one or more unique sets of unique spread orders, separate buy orders converted from the one buy order are considered equivalent to each other, separate sell orders converted from the sell order are considered equivalent to each other, virtual sell orders are considered equivalent to each other and virtual buy orders are considered equivalent to each other. 
     
     
         5 . The computer implemented method of  claim 1  wherein the tradeable item comprises a futures contract, an order to buy a futures contract, an order to sell a futures contract, a combination contract, or a combination thereof. 
     
     
         6 . The computer implemented method of  claim 1  wherein each of the at least one buy order and at least one sell order comprise a leg of the strategy. 
     
     
         7 . The computer implemented method of  claim 6  wherein the strategy comprises one of a butterfly or condor. 
     
     
         8 . The computer implemented method of  claim 1  wherein the combination of interrelated orders is specified using the FIX protocol. 
     
     
         9 . The computer implemented method of  claim 1  wherein the tradeable item is characterized by a price, a quantity, a delivery month or combinations thereof. 
     
     
         10 . The computer implemented method of  claim 1  wherein the at least one order to buy and at least one order to sell comprises a maximal form. 
     
     
         11 . The computer implemented method of  claim 1  further comprising representing each of the one or more unique sets of unique spread orders as a graph having edges and nodes defined thereby. 
     
     
         12 . A system for identifying, for an order for a strategy comprising a combination of interrelated orders for one or more outright contracts, a plurality of individual orders which, in combination, is counter to the order for the strategy, the system comprising a processor and a memory coupled therewith, the system further comprising:
 an order receiver computer program stored in the memory and executable by the processor to cause the processor to receive the order for the strategy, the strategy comprising at least one order to buy and at least one order to sell, each of the at least one order to buy and at least one order to sell being for an associated quantity of at least one item of a plurality of items tradeable on an exchange, wherein the associated quantities of any of the at least one order to buy and the at least one order to sell may be different from another of the at least one order to buy and the at least one order to sell;   a unit order set converter computer program stored in the memory and coupled with the order receiver computer program and executable by the processor to cause the processor to convert the at least one order to buy and the at least one order to sell into a set of unit orders comprising a separate buy order for each of the associated quantity of each of the at least one order to buy and a separate sell order for each of the associated quantity of each of the at leas tone order to sell;   a minimal set identifier computer program stored in the memory and coupled with the unit order set converter computer program and executable by the processor to cause the processor to identify, within the set of unit orders, one or more unique sets of unique spread orders, each unique spread order comprising a unique combination of one of the separate buy orders and one of the separate sell orders, each unique set of unique spread orders further comprising a synthetic spread order for each of the separate buy order or separate sell orders not otherwise included in a unique spread order of that unique set of unique spread orders, and determine the relationships between each of the interrelated orders of the combination of the strategy; and   an implied order generator computer program stored in the memory and coupled with the minimal set identifier computer program and executable by the processor to cause the processor to compute the plurality of individual orders which, if placed in combination, are counter to the order for the strategy based on the determined relationships and each of the unique sets of unique spread orders and synthetic orders.   
     
     
         13 . The system of  claim 12  wherein the unit order set converter computer program further comprises:
 a conversion processor computer program stored in the memory and executable by the processor to cause the processor, for each of the at least one buy order for a quantity of more than one unit, to convert the buy order into a separate buy order for each unit of the quantity, the unit order set comprising the remaining of the buy orders for a quantity of only one unit and the separate buy orders; and 
 the conversion processor computer program being further executable by the processor to cause the processor to, for each of the at least one sell order for a quantity of more than one unit, to convert the sell order into a separate sell order for each unit of the quantity, the unit order set further comprising the remaining of the sell orders of the set of orders for a quantity of only one unit and the separate sell orders. 
 
     
     
         14 . The system of  claim 12  wherein the minimal set identifier computer program further comprises:
 an order sequencer computer program stored in the memory and executable by the processor to cause the processor to order the separate sell orders of the set of unit orders in a first sequence; 
 an order selector computer program stored in the memory and coupled with the order sequencer computer program and executable by the processor to cause the processor to select, one at a time, each of the separate buy orders of the set of unit orders, order the separate buy orders of the set of unit orders in a second sequence beginning with the selected separate buy order, and, for one of the one or more unique sets of unique spread orders for which a unique spread order has not yet been generated, generate, by the processor for each buy order in order of the second sequence for which a unique spread order does not already include a pairing thereof, a unique spread order comprising a pairing of the buy order with an unpaired sell order in order of the first sequence, and wherein for each remaining unpaired buy order, generate a synthetic spread order comprising a pairing thereof with a virtual sell order and for each remaining unpaired sell order, generate a synthetic spread order comprising a pairing thereof with a virtual buy order; and 
 a minimal set comparator computer program stored in the memory and coupled with the order selector computer program and executable by the processor to cause the processor to compare each of the one or more unique sets of unique spread orders to another of the one or more unique sets of unique spread orders and removing the other of the one or more unique sets of unique spread orders if the other of the one or more unique sets of unique spread orders is substantially equivalent thereto, each of the remaining one or more unique sets of unique spread orders being unique. 
 
     
     
         15 . The system of  claim 14  wherein, for the purpose of determining equivalence among the one or more unique sets of unique spread orders, separate buy orders converted from the buy order are considered equivalent to each other, separate sell orders converted from the sell order are considered equivalent to each other, virtual sell orders are considered equivalent to each other and virtual buy orders are considered equivalent to each other. 
     
     
         16 . The system of  claim 12  wherein the tradeable item comprises a futures contract, an order to buy a futures contract, an order to sell a futures contract, a combination contract, or a combination thereof. 
     
     
         17 . The system of  claim 12  wherein each of the at least one buy order and at least one sell order comprise a leg of the strategy. 
     
     
         18 . The system of  claim 17  wherein the strategy comprises one of a butterfly or condor. 
     
     
         19 . The system of  claim 12  wherein the combination of interrelated orders is specified using the FIX protocol. 
     
     
         20 . The system of  claim 12  wherein the tradeable item is characterized by a price, a quantity, a delivery month or combinations thereof. 
     
     
         21 . The system of  claim 12  wherein the at least one order to buy and at least one order to sell comprises a maximal form. 
     
     
         22 . The system of  claim 12  further comprising a display coupled with the processor and operative to represent each of the one or more unique sets of unique spread orders as a graph having edges and nodes defined thereby. 
     
     
         23 . A system for identifying, for an order for a strategy comprising a combination of interrelated orders for one or more outright contracts, a plurality of individual orders which, in combination, is counter to the order for the strategy, the system comprising:
 means for receiving the order for the strategy, the strategy comprising at least one order to buy and at least one order to sell, each of the at least one order to buy and at least one order to sell being for an associated quantity of at least one item of a plurality of items tradeable on an exchange, wherein the associated quantities of any of the at least one order to buy and the at least one order to sell may be different from another of the at least one order to buy and the at least one order to sell;   means for converting the at least one order to buy and the at least one order to sell into a set of unit orders comprising a separate buy order for each of the associated quantity of each of the at least one order to buy and a separate sell order for each of the associated quantity of each of the at leas tone order to sell, and further identifying, within the set of unit orders, one or more unique sets of unique spread orders, each unique spread order comprising a unique combination of one of the separate buy orders and one of the separate sell orders, each unique set of unique spread orders further comprising a synthetic spread order for each of the separate buy order or separate sell orders not otherwise included in a unique spread order of that unique set of unique spread orders;   means for determining the relationships between each of the interrelated orders of the combination of the strategy; and   means for computing the plurality of individual orders which, if placed in combination, are counter to the order for the strategy based on the determined relationships and each of the unique sets of unique spread orders and synthetic orders.   
     
     
         24 . The system of  claim 23  wherein the means for converting further comprises:
 for each of the at least one buy order for a quantity of more than one unit, means for converting the buy order into a separate buy order for each unit of the quantity, the unit order set comprising any remaining buy orders which are for a quantity of only one unit and the separate buy orders; and 
 for each of the at least one sell order for a quantity of more than one unit, means for converting the sell order into a separate sell order for each unit of the quantity, the unit order set further comprising any remaining sell orders which are for a quantity of only one unit and the separate sell orders. 
 
     
     
         25 . The system of  claim 23  wherein the means for identifying further comprises:
 means for ordering the separate sell orders of the set of unit orders in a first sequence; 
 means for selecting, one at a time, each of the separate buy orders of the set of unit orders, ordering the separate buy orders of the set of unit orders in a second sequence beginning with the selected separate buy order, and, for one of the one or more unique sets of unique spread orders for which a unique spread order has not yet been generated, generating, by the processor for each buy order in order of the second sequence for which a unique spread order does not already include a pairing thereof, a unique spread order comprising a pairing of the buy order with an unpaired sell order in order of the first sequence, and wherein for each remaining unpaired buy order, generating a synthetic spread order comprising a pairing thereof with a virtual sell order and for each remaining unpaired sell order, generating a synthetic spread order comprising a pairing thereof with a virtual buy order; and 
 means for comparing each of the one or more unique sets of unique spread orders to another of the one or more unique sets of unique spread orders and removing the other of the one or more unique sets of unique spread orders if the other of the one or more unique sets of unique spread orders is substantially equivalent thereto, each of the remaining one or more unique sets of unique spread orders being unique.