Method and apparatus for improved electronic trading

Abstract

A method and apparatus for outputting data that represents the change in value of an options premium that would have resulted if the options traded in a direct linear volume relationship with its underlying security is provided. Input values utilized include a delta value, a gamma value, a value-weighted average price of an underlying stock, a reference price of the underlying stock, and an original order premium value.

1 . A computer-readable storage medium having instructions which, when executed on a processor, perform a method for generating a benchmark price for an exchange-traded equity derivatives order, the method comprising: receiving a first delta value, a gamma value, a value-weighted average price value of an underlying stock, a reference price value of the underlying stock, and an original order premium value; where the first delta value is a measure of the rate of change in a theoretical value of an option for a one-unit change in the price of the underlying stock;
 the gamma value is a measure of the rate of change in a delta of an option for a one-unit change in the price of the underlying stock; and   the original order premium value is an agreed value;   calculating a master rate of change value based on the value-weighted average price and reference price values;   calculating an adjusted delta value based on the first delta value, the master rate of change value, and the gamma value;   calculating a gamma-weighted average price value based on the original order premium value, the master rate of change value, and the adjusted delta value; and   outputting the gamma-weighted average price value as a benchmark price for the order.   
     
     
         2 . The computer-readable storage medium according to  claim 1 , wherein the original order premium value is set for an order interval. 
     
     
         3 . The computer-readable storage medium according to  claim 1 , wherein the master rate of change value is calculated by subtracting the reference price value from the value-weighted average price value. 
     
     
         4 . The computer-readable storage medium according to  claim 1 , wherein the adjusted delta value is calculated by multiplying the master rate of change value by the gamma value, and adding the first delta value. 
     
     
         5 . The computer-readable storage medium according to  claim 1 , wherein the gamma-weighted average price value is calculated by multiplying the master rate of change value by the adjusted delta value, and adding the original order premium value. 
     
     
         6 . The computer-readable storage medium according to  claim 1 , wherein the gamma-weighted average price value is calculated by multiplying the first delta value by the rate of change value to achieve a first product, squaring the rate of change value and multiplying the squared rate of change value by the gamma value to achieve a second product, and adding the first product and % of the second product to the original order premium value. 
     
     
         7 . An apparatus for generating a benchmark trading price for an exchange-traded equity derivatives order, comprising:
 an input module for receiving input values, the input values comprising a first delta value, a gamma value, a value-weighted average price value of an underlying stock, a reference price value of the underlying stock, and an original order premium value; where:   the first delta value is a measure of the rate of change in an option's theoretical value for a one-unit change in the price of the underlying stock;   the gamma value is a measure of the rate of change in an option's first delta value for a one-unit change in the price of the underlying stock; and   the original order premium value is a value set for the order with corresponding values based on the first delta value, gamma value, and reference price value;   a processor for performing calculations, including:   calculating a master rate of change value based on the value-weighted average price and the reference price values;   calculating an adjusted delta value based on the first delta value, the master rate of change value, and the gamma value; and   calculating a gamma-weighted average price value based on the original order premium value, the master rate of change value, and the adjusted delta value; and   an output module for outputting the gamma-weighted average price value as a benchmark trading price for the order.   
     
     
         8 . The apparatus according to  claim 7 , wherein the master rate of change value is calculated by subtracting the reference price value from the value-weighted average price value. 
     
     
         9 . The apparatus according to  claim 7 , wherein the adjusted delta value is calculated by multiplying the master rate of change value by the gamma value, and adding the first delta value. 
     
     
         10 . The apparatus according to  claim 7 , wherein the gamma-weighted average price value is calculated by multiplying the master rate of change value by the adjusted delta value, and adding the original order premium value. 
     
     
         11 . The apparatus according to  claim 7 , wherein the gamma-weighted average price value is calculated by multiplying the first delta value by the rate of change value to achieve a first product, squaring the rate of change value and multiplying the squared rate of change value by the gamma value to achieve a second product, an adding the first product and % of the second product to the original order premium value. 
     
     
         12 . A computer-readable storage medium having instructions which, when executed by a processor, perform a method for matching pre-open orders using a gamma-weighted average price, the method comprising:
 receiving pre-open orders from a trader during a first time period, the pre-open orders including a seller amount and price or a buyer amount and price;   storing the pre-open orders in an order module;   matching the pre-open orders during a second time period that begins after the first time period ends, the orders being matched when the seller amount and price of a pre-open order matches the buyer amount and price of a pre-open order;   receiving market data during a third time period that begins after the second time period ends; calculating a gamma-weighted average price value based on the received market data, the gamma-weighted average price being based on an original order premium value, a master rate of change value, and an adjusted delta value; and outputting the gamma-weighted average price value as an estimate of a trading price for the order.   
     
     
         13 . The computer-readable storage medium of  claim 12 , further comprising assigning to the pre-open orders a rank when the pre-open orders are received, the rank determining the order in which the pre-open orders are matched. 
     
     
         14 . The computer-readable storage medium of  claim 12 , further comprising;
 transmitting to the trader results of the matching and the gamma-weighted average price; and   transmitting to an exchange the results of the matched trades and the gamma-weighted average price.   
     
     
         15 - 18 . (canceled)