Managing the execution of trades between market makers

Abstract

According to one embodiment, a method of managing trading is provided. A first bid for a first instrument is received from a first market maker at a first bid price. A first offer for the first instrument is received from a second market maker at a first offer price, the first offer price being lower than the first bid price. As a result of the first offer price being lower than the first bid price, the first bid price is automatically decreased to match the first offer price, and a first timer having a predetermined duration is started. If the first timer expires and both the first bid and the first offer exist at the first offer price when the first timer expires, a trade between the first bid and the first offer is automatically executed.

1 . (canceled) 
     
     
         2 . A method comprising:
 receiving, at a computer system of an electronic trading system, over a communication network, a first bid for a first instrument from a first market maker at a first bid price, and a first offer for the first instrument from a second market maker at a first offer price, the first offer price being lower than the first bid price, the computer system having a processor;   comparing, at the computer system of the electronic trading system, the first offer price to the first bid price, and determining whether the first bid and first offer are both from market makers, and if the first offer price is lower than the first bid price establishing a crossing bid and first bid and first offer as orders are both from market makers, automatically decreasing the first bid price to match the first offer price and then delaying any automatic action toward executing the orders against each other until expiration of a first timer having a predetermined duration from receipt of the orders;   before the first timer expires:
 receiving, over the communication network, from the first market maker an instruction to increase the first bid price to a new increased first bid price above the first offer price; 
 increasing the first bid price to the new increased first bid price as a result of receiving the instruction; and 
 as a result of the first bid price being increased above the first offer price, automatically increasing the first offer price to match the new increased first bid price and restarting the first timer; and 
   displaying, over the communication network, to a customer at a customer terminal of the computer system a bid-offer spread, but not the crossing bid, prior to expiration of the first timer, wherein bid price and offer price of the bid-offer spread are both equal to the first bid price,   wherein the predetermined duration of the first timer is determined based on at least one parameter associated with the first instrument, and the at least one parameter includes a volatility of the first instrument, and further comprising instructions that when executed by the processor cause the processor to dynamically adjust the first timer with respect to the volatility of the first instrument and in response to feedback over the communication network from a given market maker.   
     
     
         3 . The method of  claim 2 , further comprising terminating the first timer if a price of either the first bid or the first offer is moved before the first timer expires such that the first offer price is greater than the first bid price. 
     
     
         4 . The method of  claim 2 , further comprising:
 receiving at the computer system a second bid for the first instrument from a customer at a second bid price before receiving the first offer from the second market maker, wherein the second bid price does not cross or match any existing offer; and   after receiving the first offer but before starting the first timer, automatically executing a trade between the second bid and a first portion of the first offer; and   wherein executing the trade between the first bid and the first offer comprises executing a trade between the first bid and a second portion of the first offer.   
     
     
         5 . The method of  claim 2 , wherein the predetermined duration of the first timer is determined based on at least one parameter associated with the first instrument. 
     
     
         6 . The method of  claim 2 , further comprising:
 receiving at the computer system a second bid for a second instrument from a third market maker at a second bid price;   receiving at the computer system a first offer for the second instrument from a fourth market maker at a second offer price of a second offer, the second offer price being lower than the second bid price;   as a result of the second offer price being lower than the second bid price, automatically decreasing the second bid price to match the second offer price;   starting a second timer having a predetermined duration; and   if the second timer expires and both the second bid and the second offer exist at the second offer price when the second timer expires, automatically executing a trade between the second bid and the second offer;   wherein the predetermined duration of the second timer is different from the predetermined duration of the first timer.   
     
     
         7 . The method of  claim 2 , wherein automatically decreasing the first bid price to match the first offer price comprises automatically decreasing the first bid price and increasing the first offer price such that the first bid price and the first offer price are matched at a first locked price between an original first bid price and an original first offer price. 
     
     
         8 . The method of  claim 2 , further comprising, before the first timer expires:
 receiving from the first market maker an instruction to decrease the first bid price to a new decreased first bid price below the first offer price;   decreasing the first bid price to the new decreased first bid price as a result of receiving the instruction; and   as a result of the first bid price being decreased below the first offer price, terminating the first timer.   
     
     
         9 . A non-transitory computer-readable tangible media embodying therein one or more programs operable, when executed by a computer system of an electronic trading system, the computer system having a processor, to:
 receive, over a communication network, a first bid for a first instrument from a first market maker at a first bid price, and a first offer for the first instrument from a second market maker at a first offer price, the first offer price being lower than the first bid price;   compare the first offer price to the first bid price, and determine whether the first bid and first offer are both from market makers, and if the first offer price is lower than the first bid price establishing a crossing bid and the orders are both from market makers, automatically decrease the first bid price to match the first offer price and then delay any automatic action toward executing the first bid and first offer as orders against each other by the computer system until expiration of a first timer having a predetermined duration from receipt of the two orders;   before the first timer expires:
 receive, over the communication network, from the first market maker an instruction to increase the first bid price to a new increased first bid price above the first offer price; 
 increase the first bid price to the new increased first bid price as a result of receiving the instruction; and 
 as a result of the first bid price being increased above the first offer price, automatically increase the first offer price to match the new increased first bid price and restart the first timer; and 
   display, over the communication network, to a customer at a customer terminal of the computer system a bid-offer spread, but not the crossing bid, prior to expiration of the first timer, wherein bid price and offer price of the bid-offer spread are both equal to the first bid price,   wherein the predetermined duration of the first timer is determined based on at least one parameter associated with the first instrument, and the at least one parameter includes a volatility of the first instrument, and further comprising instructions that when executed by the processor cause the processor to dynamically adjust the first timer with respect to the volatility of the first instrument and in response to feedback over the communication network from a given market maker.   
     
     
         10 . The computer-readable tangible media of  claim 9 , wherein the one or more programs are further operable to terminate the first timer if the price of either the first bid or the first offer is moved before the first timer expires such that the first offer price is greater than the first bid price. 
     
     
         11 . The computer-readable tangible media of  claim 9 , wherein the one or more programs are further operable to:
 receive a second bid for the first instrument from a customer at a second bid price before receiving the first offer from the second market maker, wherein the second bid price does not cross or match any existing offer; and   after receiving the first offer but before starting the first timer, automatically execute a trade between the second bid and a first portion of the first offer; and   wherein executing the trade between the first bid and the first offer comprises executing a trade between the first bid and a second portion of the first offer.   
     
     
         12 . The computer-readable tangible media of  claim 9 , wherein the one or more programs are operable to automatically decrease the first bid price to match the first offer price by automatically decreasing the first bid price and increasing the first offer price such that the first bid price and the first offer price are matched at a first locked price between an original first bid price and an original first offer price. 
     
     
         13 . The computer-readable tangible media of  claim 9 , wherein the one or more programs are further operable to:
 before the first timer expires:
 receive from the first market maker an instruction to decrease the first bid price to a new decreased first bid price below the first offer price; 
 decrease the first bid price to the new decreased first bid price as a result of receiving the instruction; and 
 as a result of the first bid price being decreased below the first offer price, terminate the first timer. 
   
     
     
         14 . An electronic trading system for managing trading, comprising:
 a computer system having a processor; and   a computer readable medium comprising processor readable instructions that when executed by the processor, cause the processor to:
 receive, over a communication network, a first bid for a first instrument from a first market maker at a first bid price, and a first offer for the first instrument from a second market maker at a first offer price, the first offer price being lower than the first bid price; 
 compare the first offer price to the first bid price, and determine whether the first bid and first offer are both from market makers, and if the first offer price is lower than the first bid price establishing a crossing bid and the orders are both from market makers, automatically decrease the first bid price to match the first offer price and then delay any automatic action toward executing the first bid and first offer as orders against each other by the computer system until expiration of a first timer having a predetermined duration from receipt of the two orders; 
 before the first timer expires:
 receive from the first market maker an instruction to increase the first bid price to a new increased first bid price above the first offer price; 
 increase the first bid price to the new increased first bid price as a result of receiving the instruction; and 
 as a result of the first bid price being increased above the first offer price, automatically increase the first offer price to match the new increased first bid price and restart the first timer; and 
 
 display, over the communication network, to a customer at a customer terminal of the computer system a bid-offer spread, but not the crossing bid, prior to expiration of the first timer, wherein the bid price and the offer price of the bid-offer spread are both equal to the first bid price; 
 wherein the predetermined duration of the first timer is determined based on at least one parameter associated with the first instrument, and the at least one parameter includes a volatility of the first instrument, and further comprising instructions that when executed by the processor cause the processor to dynamically adjust the first timer with respect to the volatility of the first instrument and in response to feedback over the communication network from a given market maker. 
   
     
     
         15 . The system of  claim 14 , further comprising instructions that when executed by the processor cause the processor to:
 receive a second bid for the first instrument from a customer at a second bid price before receiving the first offer from the second market maker, wherein the second bid price does not cross or match any existing offer; and   after receiving the first offer but before starting the first timer, automatically execute a trade between the second bid and a first portion of the first offer; and   wherein executing the trade between the first bid and the first offer comprises executing a trade between the first bid and a second portion of the first offer.   
     
     
         16 . The system of  claim 14 , further comprising instructions that when executed by the processor cause the processor to:
 automatically decrease the first bid price to match the first offer price by automatically decreasing the first bid price and increasing the first offer price such that the first bid price and the first offer price are matched at a first locked price between an original first bid price and an original first offer price.   
     
     
         17 . The system of  claim 14 , further comprising instructions that when executed by the processor cause the processor to:
 before the first timer expires:
 receive from the first market maker an instruction to decrease the first bid price to a new decreased first bid price below the first offer price; 
 decrease the first bid price to the new decreased first bid price as a result of receiving the instruction; and 
 as a result of the first bid price being decreased below the first offer price, terminate the first timer. 
   
     
     
         18 . The system of  claim 14 , further comprising instructions that when executed by the processor cause the processor to:
 terminate the first timer if the price of either the first bid or the first offer is moved before the first timer expires such that the first offer price is greater than the first bid price.   
     
     
         19 . The method of  claim 2 , further comprising displaying to the customer at the customer terminal a crossing bid or a crossing offer in response to execution of a trade. 
     
     
         20 . The method of  claim 5 , wherein the at least one parameter includes a volatility of the first instrument, and further comprising dynamically adjusting the first timer with respect to the volatility of the first instrument. 
     
     
         21 . The system of  claim 14 , wherein the predetermined duration of the first timer is determined based on at least one parameter associated with the first instrument, and the at least one parameter includes a volatility of the first instrument, and further comprising instructions that when executed by the processor cause the processor to dynamically adjust the first timer with respect to the volatility of the first instrument and in response to feedback over the communication network from a given market maker.