US 5136501 Anonymous matching system
ABSTRACT – A matching system for trading instruments in which bids are automatically matched against offers for given trading instruments for automatically providing matching transactions in order to complete trades for the given trading instruments, includes a host computer means (20) comprising means for anonymously matching active bids and offers in the system by trading instrument based on a variable matching criteria, which comprises counterparty credit limit between counterparties (24a, 26b) to a potential matching transaction. The system also includes a transaction originating keystation (24a) for providing a bid on a given trading instrument to the system for providing the potential matching transaction; a counterparty keystation (26b) for providing an offer on the given trading instrument involved in the potential matching transaction; and network means (22) for interconnecting the host computer means (20), the transaction originating keystation (24a) and the counterparty keystation (26b) in the system for enabling data communications therebetween. Both the transaction originating keystation (24a) and the counterparty keystation (26b) for the potential matching transaction each have an associated counterparty credit limit, with the system (20) blocking completion of the potential matching transaction between the transaction originating keystation (24a) and the counterparty keystation means (26b) when the potential matching transaction has an associated value in excess of counterparty credit limit. The assigned credit limits may be reset or varied by the users (24a, 26b) to change the ability of the user or subscriber to effectuate deals.
The present invention relates to matching systems for effectuating trades of trading instruments through automatic matching in which buyers and sellers who are willing to trade with one another based on specified criteria, such as price, quantity and credit, may automatically trade when matching events occur satisfying these criteria, and more particularly to such matching systems in which real time prices are subject to real time credit in determining the quantity of permissible match.
Information retrieval systems for financial information, such as stock market type of information and money market information, normally employ a transfer of data in a high-performance, real-time information retrieval network in which update rates, retrieval rates and subscriber and/or user population are generally very high. An example of such a system is REUTERS DEALING SERVICE which is used in the foreign exchange or money market. Such systems, while providing rapid video conversation capability, are not anonymous systems nor do they provide for automated anonymous trading such as is possible in a matching system. Of course, conversational dealing systems have their place in the market and serve particular needs where appropriate. However, anonymous matching systems are also often desired and, by their very nature, do not normally employ a conversation capability since the parties to the transactions are unknown until the transaction has been completed. Examples of satisfactory prior art video conversational systems for use in connection with trading of financial information are disclosed in commonly owned U.S. Pat. Nos. 4,531,184; 4,525,779 and 4,404,551, by way of example. Prior art examples of matching systems used in connection with the trading of trading instruments are disclosed in U.S. Pat. No. 4,412,287, which discloses as an automated stock exchange in which a computer matches buy and sell orders for a variety of stocks; U.S. Pat. No. 3,573,747, which discloses an anonymous trading system for selling fungible properties between subscribers to the system; U.S. Pat. No. 3,581,072, which discloses the use of a special purpose digital computer for matching orders and establishing market prices in an auction market for fungible goods; and U.S. Pat. No. 4,674,044, which discloses an automated securities trading system. However, none of these prior art matching systems implements or suggests the use of credit controls to determine the quantity of permissible match at the lowest common credit limit and the best bid/ask price for the largest available quantity to automatically complete a match at trade in which real time prices are subject to real time credit, such as a gross counterparty credit limit between potential parties to a matching transaction. Moreover no prior art matching systems are known to applicants in which an anonymous “more quantity” bid may be employed for additional orders at the same price. In addition, no prior art matching systems are known to applicants in which directed messages are employed between the keystations in the system and the central system to update the local entry order data bases and broadcast messages are employed to update the keystation book which is a restricted subset of the host or central system book. Furthermore, none of these prior art system employ summary books at the local keystations as subsets of the host or central system book.
In the system of the present invention, as opposed to the prior art known to applicants, the central system maintains a data base consisting of all of the trading instruments available for trade, credit information with respect to potential counterparties which may be dynamically varied by the keystations, and the bids and offers that are present throughout the system, while the client sites or keystations, which are subject to gross counterparty credit limits in determining permissible matches, maintain copies of only the best bids and offers and use those to generate a display. Thus, the client sites have some restricted subset of the total depth of the system book located at the central data base. By transmitting only subsets of the total system book from the host, the amount of network overhead that is required is significantly reduced, which reduction is further enhanced by the use of only summary information in the keystation books. Moreover, this enables the central data base maintaining a full set of information for every entry including identification of the parties which identification is not to be provided for the subset books at the keystations in an anonymous trading system, and the assigned counterparty credit limit for all potential counterparties in the system, with these counterparty credit limits not being provided to the keystations and, thus, the gross counterparty credit limits are kept anonymous in the system. The only time that the keystation is made aware of the parties involved in the transaction is after the transaction has been completed, but they are preferably never made aware of the counterparty credit limits assigned to them. In this regard, if the anonymous gross counterparty credit limit is exceeded by the potential transaction the transaction will not be completed. Thus, in the system of the present invention, the host may anonymously inhibit the occurrence of trades even though the price and quantity would otherwise match. The various credit limits are individually set by the keystations, with the anonymous gross counterparty credit limit being the minimum of the two credit limits between counterparties to a potential matching transaction. The individual keystations may reset all credit limits or dynamically vary individual credit limits with such variations sometimes enabling previously inhibited trades to then go foward because the new resulting anonymous gross counterparty credit limit then may no longer be exceeded.
Apart from the above gross counterparty credit control of the trading environment, the host may also dynamically vary the display depth of the book distributed to the local keystation, so that at given times or given days different aspects of the trading environment can be displayed. In this regard, although dynamic control of the content of a local receiver data base from a transmitted data base in an information retrieval communication network has been previously employed by applicants’ assignee, such as disclosed in U.S. Pat. Nos. 4,745,559 and 4,750,135, these systems are, nevertheless, different from the type of system control employed in the system of the present invention in which real time prices are subject to real time credit control or in which restricted subsets of the host book are maintained as summary books at the keystation local data bases. Thus, the system of the present invention for providing a distributed matching system varying real time credit control over the matching process overcomes the disadvantages of the prior art.