Sistema e método de troca de par

Sistema e método de troca de par
Este pedido reivindica o benefício da data de depósito do pedido provisório dos EUA número de série 60 / 334,163 intitulado "Método e Sistema para Parcerias Comerciais de Valores Mobiliários", que foi arquivado em 29 de novembro de 2001, cujo conteúdo é incorporado por referência aqui .
O presente invento refere-se a um sistema e método para a negociação de títulos e, em particular, para um sistema e método de apresentação de pedidos de troca de pares.
Uma estratégia reconhecida para negociação de títulos é conhecida como troca de pares. A negociação de par é uma estratégia de investimento não direcional em que o investidor identifica dois títulos com características semelhantes e os títulos estão negociando atualmente em uma relação de preço que está fora de sua faixa de negociação histórica. O investidor explora a relação de preço entre os valores mobiliários, comprando a garantia subvalorizada enquanto vende de curto a segurança sobrevalorizada. Como a negociação de par é uma estratégia neutra em termos de mercado, é uma estratégia particularmente desejável para investir em mercados voláteis.
Um contexto em que o comércio de pares é útil é o lugar onde um investidor deseja tirar proveito de uma oportunidade de arbitragem resultante de uma fusão entre duas empresas. Por exemplo, a Empresa A anunciou um acordo definitivo para adquirir a Companhia T, caso em que os acionistas da Companhia T receberão 0,5 ações da Companhia A por cada ação das ações da Companhia T que possuem. O investidor deseja capturar o "spread" entre a contrapartida oferecida (0,5 partes de A) e o preço das ações da série T. Para fazer isso, o investidor compra ações em ações da T e vende ações da ação A.
Por exemplo, se o estoque T estiver negociando a US $ 28 por ação e o estoque A estiver negociando US $ 60 por ação, o investidor poderá executar um comércio por 200 mil spreads comprando 200 mil ações da T e vendendo 100 mil ações da ação A. Após a fusão, o investidor cobrirá a posição curta no estoque A com as 100.000 ações da ação A que os investidores recebem em troca das 200.000 ações que o investidor possuía no estoque T. Assim, ao executar o par de negociação, o investidor bloqueia em um lucro de US $ 400.000 (assumindo que a fusão passa).
Um investidor que deseja executar um par de negociação primeiro formula um pedido de troca de par. Um pedido de troca de par é caracterizado por uma pluralidade de parâmetros, incluindo, por exemplo, uma quantidade de spread, um ticker de compra, um ticker de venda, uma taxa de negociação de compra, uma taxa de negociação de venda, seja para negociar oddlots, seja para executar uma venda curta, seja para trabalhar o lado da oferta de um spread (ou seja, comprar ações primeiro e assumir o risco de execução de venda a descoberto), um tamanho mínimo de onda (ou seja, o valor mínimo da ação por tranche), um tamanho de onda máximo (ou seja, o valor máximo da ação) por tranche), um fator de deslizamento, uma unidade de perda de onda, um montante de cancelamento de incômodo, uma unidade de cancelamento de melhoria, uma distância de ordem mínima, um tipo de limite de ordem (por exemplo, diferença de dólar, por cento de prêmio ou desconto, venda por compra ou compra venda, ajuste de caixa) e parâmetros de limite de pedidos (por exemplo, taxa de cálculo de compra, taxa de cálculo de venda, compensação de caixa). Uma vez que um pedido de troca de par é formulado, o investidor normalmente apresenta o pedido de troca de par para um corretor afiliado a uma instituição financeira para execução.
Como a formulação de uma solicitação de troca de par requer que o investidor especifique vários parâmetros, é preciso tempo para que o investidor prepare e envie um pedido de troca de par para explorar uma determinada condição de mercado. Este tempo exigido pode fazer com que um investidor perca uma oportunidade de negociação potencialmente lucrativa, especialmente em mercados em rápido movimento.
Consequentemente, é desejável fornecer um sistema e método para enviar solicitações de troca de par.
SUMARIO DA INVENÇÃO.
O presente invento destina-se a superar as desvantagens das práticas de comércio de pares da técnica anterior. Sob a presente invenção é fornecido um método para negociar um par de valores mobiliários e inclui as etapas de recuperar uma solicitação de troca de pares previamente configurada e o pedido de troca de pares previamente configurado é submetido a um módulo de realização de comércio de par.
Em uma forma de realização exemplar, o método inclui o passo de arquivar pelo menos um comércio de pares passados ​​em um arquivo de troca de pares e inclui ainda a etapa de recuperar o comércio de pelo menos um par do arquivo de troca de par.
Numa concretização exemplar, o método inclui o passo de armazenar pelo menos uma solicitação de comércio de pares pré-definido em uma biblioteca de comércio de par e inclui ainda o passo de recuperar o pelo menos um comércio de pares pré-definido da biblioteca de comércio de par.
Numa concretização exemplar, o pelo menos um comércio de pares pré-definido é formulado por um comerciante de pares.
Numa concretização exemplar, o método inclui o passo de recuperar uma solicitação de troca de par previamente configurada com base em pelo menos um critério de pesquisa.
Numa concretização exemplar, o pelo menos um critério de pesquisa é uma data.
Numa concretização exemplar, o pelo menos um critério de pesquisa é selecionado de um grupo que inclui um nome de comerciante e um nome de segurança.
Numa concretização exemplar, a solicitação de troca de pares previamente configurada inclui uma pluralidade de parâmetros e o método inclui ainda o passo de modificar pelo menos um da pluralidade de parâmetros.
Numa forma de realização exemplar, a pluralidade de parâmetros inclui parâmetros do grupo que incluem um símbolo de compra, uma quantidade de compra, um símbolo de venda, uma quantidade de venda, uma relação de compra, uma taxa de venda, uma quantidade de onda mínima, uma quantidade de onda máxima e uma quantidade de deslizamento.
Numa concretização exemplar, a solicitação de troca de pares previamente configurada inclui uma pluralidade de parâmetros e inclui ainda um passo de proporcionar um atalho para modificar automaticamente pelo menos um da pluralidade de parâmetros de acordo com uma estratégia de negociação.
Em uma forma de realização exemplar, o atalho é selecionado do grupo, incluindo Flip com Short, Flip with Long, Toggle Short e Order Unfilled Quantity.
Sob a presente invenção, é fornecido um sistema de negociação de um par de valores mobiliários e inclui um módulo de realização de comércio de par para cumprir um pedido de troca de par. Também está incluído uma loja de comércio de pares para armazenar trocas de par previamente configuradas. Pelo menos um dos comércios de pares previamente configurados é recuperado da loja de comércio de par e é submetido ao módulo de realização de comércio de par.
Em uma forma de realização exemplar, a loja do comércio do par é um arquivo de comércio de dupla para armazenar os últimos negócios de pares.
Em uma forma de realização exemplar, a loja de comércio de pares é uma biblioteca de par para armazenar trocas de par predefinidas.
Consequentemente, um método e um sistema são fornecidos para negociação de títulos par.
O invento compreende, portanto, as características de construção, combinação de elementos e disposição de peças que serão exemplificadas na descrição detalhada a seguir, e o escopo da invenção será indicado nas reivindicações. Outras características e vantagens da invenção serão evidentes a partir da descrição, dos desenhos e das reivindicações.
DESCRIÇÃO DOS DESENHOS.
Para uma compreensão mais completa da invenção, faz-se referência à descrição a seguir em conjunto com os desenhos anexos, nos quais:
FIG. 1 é um diagrama de blocos de um sistema de comércio de pares de acordo com a presente invenção;
FIG. 2 é uma captura de tela de uma listagem de trocas passadas obtidas a partir de um arquivo de troca de pares do sistema da FIG. 1;
FIG. 3 é uma captura de tela de uma lista de trocas de pares recuperadas de uma biblioteca de par do sistema da FIG. 1; e.
FIG. 4 é uma captura de tela de uma GUI que um cliente usa para modificar um comércio de pares obtido da biblioteca par e arquivo de troca de pares da FIG. 1.
DESCRIÇÃO DETALHADA DAS FORMAS DE REALIZAÇÃO PREFERIDAS.
Referindo-se agora à FIG. 1, é mostrado um diagrama de blocos de um sistema de comércio de pares 1 de acordo com o presente invento. O Sistema 1 recebe pedidos de troca de par de clientes que operam o dispositivo de acesso ao cliente 7 e tenta preencher os pedidos de troca de par segundo de acordo com os parâmetros associados ao pedido de troca de par particular. O Sistema 1 inclui um módulo de preenchimento de comércio de par 3 para cumprir pedidos de troca de pares recebidos de clientes. Numa concretização exemplar, o módulo de realização de intercâmbio de pares 3 inclui um motor de troca de pares 5 e / ou uma rede de cruzamento de par 9 para preencher pedidos de comércio de pares. Com base em condições de mercado e / ou preferências incluídas no pedido de troca de par, o módulo de preenchimento de par 3 encaminha a dupla solicitação comercial (total ou parcialmente) para qualquer mecanismo de troca de par 5 ou rede de cruzamento de par 9 para cumprimento. Por exemplo, o módulo de preenchimento de par 3 pode encaminhar uma solicitação de troca de par para emparelhar o mecanismo de negociação 5 que, em seguida, tenta preencher o pedido comercial executando as negociações apropriadas em um mercado externo 13 (que pode incluir, a título de exemplo não limitativo, o Novo York Stock Exchange, NASDAQ ou qualquer outro mercado financeiro), ou contra um inventário 15 do pedido comercial mantido por uma instituição financeira. Além disso, o módulo de preenchimento de comércio 3 também pode preencher (no todo ou em parte) um pedido de troca de par, encaminhando a solicitação comercial para emparelhar rede de cruzamento 9 para combinar com outros pedidos de troca de pares. Se uma solicitação de troca de par é encaminhada para a rede de cruzamento de par 9, a rede de cruzamento de par 9 cumpre a solicitação (no todo ou em parte) combinando-a com outro pedido de troca de par recebido pela rede de cruzamento de par 9, combinando a solicitação com o inventário 15 controlado pela instituição financeira e / ou enviando o pedido comercial para emparelhar o motor de negociação 5 para execução em mercados externos 13.
Em operação, o sistema 1 pode satisfazer uma dupla solicitação comercial usando o mecanismo de troca de pares 5 ou a rede de cruzamento de par 9 ou uma combinação dos dois. Por exemplo, um pedido de troca de pares recebido pelo sistema 1 pode ser completamente preenchido pelo mecanismo de troca de pares 5, como se segue.
Assuma um caso em que a XYZ está assumindo a ABC e está oferecendo 0,575 ações da XYZ por cada ação ABC e investidor. A Arb quer investir na diferença de preço entre o estoque ABC e o estoque XYZ. Para aproveitar a diferença de preço, a Arb quer bloquear a diferença entre o valor oferecido (estoque 0,575 * XYZ) e o valor do estoque ABC comprando ações ABC e vendendo ações XYZ sujeitas à condição de que ABC-0.575 XYZ & lt; = - $ 1.19 (ou seja, a Arb deseja capturar uma diferença de US $ 1,19 entre a oferta de aquisição da XYZ e o preço da ação da ABC).
Para preencher este comércio de pares, a Arb apresenta uma solicitação de troca de par para o módulo de interface do cliente 11 (usando o dispositivo de acesso ao cliente 7). A dupla solicitação comercial geralmente inclui uma série de parâmetros que definem o comércio de pares e que também podem ser usados ​​pelo módulo de interface do cliente 11 para determinar como o pedido de troca de par deve ser preenchido. Arb geralmente indica no pedido comercial o número de spreads que o Arb deseja investir e também fornece um valor mínimo e máximo de participação que ele está disposto a negociar por parcela.
Por exemplo, a Arb pode indicar o desejo de investir em 100 mil spreads e pode desejar apenas trocar o spread de 3.000-8.000 ações por vez. A Arb geralmente define esta faixa de tamanho da parcela com base na liquidez e volatilidade do estoque ABC e do estoque XYZ. A Arb pode definir um tamanho de tranche mínimo maior se as ações da ABC e as ações do XYZ forem ações bastante líquidas porque uma maior liquidez aumenta a probabilidade de que um tamanho maior da parcela seja executado. A Arb pode definir um tamanho de tranche máximo mais baixo se o estoque de XYZ e o estoque de ABC forem ações voláteis, de modo a limitar o "risco de perna" associado à execução de um comércio de pares.
Ainda outro parâmetro de troca de par Arb fornece é o limite de propagação (no caso acima -1.19), que é a quantidade que o Arb deseja capturar no comércio. Arb não precisa fornecer, no entanto, os preços discretos em que os negócios para ações ABC e XYZ devem ser executados à medida que esses preços são calculados pelo mecanismo de troca de pares 5 (e / ou rede de cruzamento de pares 9).
O Sistema 1 também inclui um arquivo de troca de pares 17 em comunicações com o módulo de preenchimento de par 3 para armazenar todos os pedidos de troca de pares recebidos pelo módulo de realização de par 3. Numa concretização exemplar, o arquivo de troca de pares 17 é um arquivo de banco de dados que possui um formato de registro para armazenar todos os parâmetros para o pedido de troca de par particular. Além disso, os campos adicionais no registro são incluídos para identificar o comerciante que reenviou o pedido de troca de par particular, se o comércio foi preenchido (no todo ou em parte), quando o comércio foi preenchido, quais partes do comércio foram preenchidas por pares motor comercial 5 (se houver), quais partes do comércio foram preenchidas pela rede de cruzamento de pares (se houver), bem como campos para qualquer outro parâmetro desejado.
Numa concretização exemplar, o módulo de interface de cliente 11 fornece ao cliente uma interface de usuário gráfica (GUI) através da qual o cliente pode navegar através de pedidos de troca de pares passados ​​armazenados no arquivo de troca de par 17 ou pode pesquisar pedidos de troca de pares passados ​​com base em vários critérios de pesquisa . Os critérios de pesquisa podem incluir, a título de exemplo não limitativo, os valores mobiliários incluídos no pedido comercial, o comerciante que formulou a dupla solicitação comercial, a data do pedido comercial. A GUI também permite ao cliente examinar todas as informações associadas a uma solicitação de troca de par particular armazenada no arquivo de troca de pares 17. Alternativamente, o dispositivo de acesso ao cliente pode incluir uma GUI através da qual o cliente acessa o módulo de interface do cliente 11 para navegar nos últimos pedidos de troca de pares.
Referindo-se agora à FIG. 2, mostra-se uma captura de tela 201 de uma listagem de negócios de pares passados ​​que se enquadram em um intervalo de datas de 5 de março de 2002 a 8 de março de 2002 que foram recuperados do arquivo de troca de pares 17. O Screenshot 201 inclui vários campos associados a cada pedido comercial exibido, incluindo um campo comercial 203, um campo de código de produto 205 (que armazena o código do produto para um par de segurança), um campo de tempo de entrada 207 (data de entrada), um campo de símbolo de compra 209 (que armazena o símbolo de estoque para a segurança a ser comprada), um campo de quantidade de compra 211 (que armazena o número de ações do símbolo de compra que deve ser comprado), um campo de quantidade de preenchimento de compra 213 (que armazena o total número de ações do símbolo de compra que foi comprado em um dia específico, se aplicável), um campo de preço médio de compra 215 (que armazena o preço médio das ações de símbolo de compra que foram compradas em um dia específico, se aplicável), uma compra campo de relação 217 (que armazena a proporção de partes de símbolo de compra para o número total de spreads a serem negociados), um campo de símbolo de venda 219 (que armazena o símbolo de estoque para a segurança a ser vendida), um campo de quantidade de venda 221 ( que armazena o número total de ações do símbolo de venda em deve ser vendido em um dia específico, se aplicável), vender o campo de quantidade de preenchimento 223 (que armazena o número total de ações do símbolo de venda que foram vendidas em um dia específico, se aplicável), um campo de preço médio de venda 225 ( que armazena o preço médio das ações de símbolo de venda que foram vendidas em um dia específico, se aplicável), um campo de taxa de venda (não mostrado) (que armazena a proporção de ações de símbolo de venda para o número total de ações que devem ser negociadas ), uma quantidade de onda mínima (não mostrada), uma quantidade de onda máxima (não mostrada) e uma quantidade de deslizamento (não mostrada) (que é um deslocamento especificado pelo usuário para os limites de propagação do usuário que é usado pelo módulo de cumprimento comercial 3 para modificar os limites de propagação especificados). Outros campos que podem ser incluídos são uma unidade de perda de onda (ou seja, indica quando uma ordem de cobertura existente deve ser cancelada e um preço mais agressivo deve ser pago com a diferença sendo aceita como uma "perna"), um montante de cancelamento de incômodo (ou seja, a quantidade de minimis pela qual a boa quantidade deve mudar antes de uma ordem de inicialização existente ser cancelada e substituída por uma quantidade nova), uma unidade de cancelamento melhorada (isto é, indica quando uma ordem existente é cancelada para melhorar uma ordem inicial) e uma distância de ordem mínima (ou seja, indica quão perto do mercado interno um preço de pedido inicial deve ser antes de uma ordem ser enviada). Além disso, qualquer outro campo desejável pode ser exibido ao cliente de forma semelhante ou adequada.
Se o cliente deseja formar uma solicitação comercial com base em uma solicitação de troca de par passado armazenada no arquivo de troca de pares 17, o cliente pode selecionar a solicitação de troca anterior desejada (por exemplo, clicando no pedido de comércio anterior específico exibido na captura de tela 201 usando um dispositivo apontador) para posterior revisão e / ou modificação. O cliente pode então modificar qualquer dos parâmetros de pedido de troca de par para se adequar a uma situação comercial particular. Em uma concretização exemplar, além do cliente, modificando diretamente os parâmetros de par de comércio, a GUI inclui atalhos (como botões) para modificar automaticamente os parâmetros de troca de pares de forma predefinida. Por exemplo, a GUI pode incluir um atalho chamado "Flip w / Short", no qual o sistema altera os preços de compra e venda, altera os índices de compra e venda e designa a venda como uma venda a descoberto. O atalho Flip w / Short é útil quando um comerciante quer reiniciar um comércio recentemente desenrolado. A GUI pode incluir um atalho "Flip w / Long" no qual o sistema altera os preços de compra e venda, altera os índices de compra e venda e designa a venda como uma venda a longo prazo. O toque Flip w / Long é útil quando um comerciante quer desenrolar um comércio iniciado recentemente. A GUI pode incluir um atalho "Toggle Short" no qual o sistema altera a designação de venda como curto ou longo. A GUI também pode incluir um atalho "Ordem de quantidade não preenchida" no qual o sistema reduz uma ordem passada pelas execuções de um dia de referência. Este atalho é útil quando um comerciante quer continuar a negociar o resíduo de uma ordem do dia anterior. Além disso, outros atalhos podem ser fornecidos para simplificar o processo de modificação de um comércio de pares passado para se adequar a uma situação comercial particular.
Uma vez que o cliente modifica os parâmetros de troca de par ou determina que os parâmetros são adequados sem modificação, o cliente pode encaminhar o pedido de troca de par para o módulo de preenchimento comercial 3 com um único toque de tecla ou clique do mouse (ou qualquer outra técnica de interface de usuário adequada). Assim, ao recuperar um comércio de pares anteriores do arquivo de troca de pares 17 e modificá-lo conforme necessário, o cliente pode formar e enviar um pedido de troca de dupla rapidamente.
O Sistema 1 também inclui uma biblioteca de pares 21 que inclui trocas de par predefinidas com parâmetros que são projetados para explorar uma determinada condição de mercado. Esses negócios de dupla podem ser formados por um comerciante de par em nome de uma instituição financeira e são inseridos na biblioteca de par 21 através de um dispositivo de acesso de biblioteca de pares 23 (por exemplo, um computador pessoal em comunicações com a biblioteca de pares 21). Desta forma, o cliente tem acesso a negociações de pares construídas por um comerciante de pares profissionais que acompanha de perto os mercados. Como no caso de negociações de pares passados ​​armazenadas no arquivo de troca de pares 17, um cliente pode acessar as negociações duplas armazenadas na biblioteca de par 21 através da GUI associada ao módulo de interface do cliente 11.
Numa concretização exemplar, os intercâmbios de dupla armazenados na biblioteca de pares 21 são "empurrados" para o dispositivo de acesso ao cliente 7 (através do módulo de interface do cliente 11) de modo que o dispositivo de acesso ao cliente 7 contenha todos os pares de trades incluídos na biblioteca de pares 21 a qualquer momento. O par trades na biblioteca de pares 21 pode ser comunicado ao dispositivo de acesso ao cliente 7 a qualquer momento usando qualquer meio de comunicação, como, por exemplo, de maneira não limitativa, a Internet. De preferência, os dois negócios são comunicados ao dispositivo de acesso ao cliente 7 durante períodos de tempo de atividade mais baixa através do meio de comunicação. O benefício de comunicar todas as negociações par na biblioteca de par 21 para o dispositivo de acesso ao cliente 7 é que os usuários terão acesso mais rápido aos negócios do par do que se tivessem que acessar a biblioteca de par 21 diretamente durante os horários de pico.
Referindo-se agora à FIG. 3, há uma captura de tela 301 de uma listagem de trocas de pares recuperadas da biblioteca de par 21. A Captura de tela 301 inclui uma estrutura de diretório 303 na qual o cliente pode navegar uma árvore de diretório 305 de acordo com a qual o par trades na biblioteca de pares 21 são organizados. Também está incluído um quadro de resultados de pesquisa 307 que exibe os parâmetros de todos os negócios de pares pré-definidos que correspondem à seleção na árvore de diretórios 305. O quadro de resultados da pesquisa 307 exibe todos os parâmetros pré-definidos associados a um comércio de pares específico, incluindo um símbolo de compra 309, um símbolo de venda 311, um índice de venda 313, uma relação de compra (não mostrada), bem como quaisquer outros parâmetros. Para escolher um comércio de pares específico, o cliente seleciona uma das negociações de pares exibidas no quadro de resultados de pesquisa 307 de qualquer maneira conveniente, como, por exemplo, não limitando, clicando duas vezes no comércio de par específico com um dispositivo apontador.
Referindo-se agora à FIG. 4, há uma captura de tela 401 de uma GUI que um cliente usa para modificar um comércio de pares obtido da biblioteca de pares 21. Uma vez que o cliente seleciona um comércio de par específico do quadro de resultados de pesquisa 307, os parâmetros de troca de pares selecionados são exibidos em um quadro principal 403. Se o cliente deseja modificar qualquer dos parâmetros de par de comércio ou quantidades de fornecimento de fornecimento, é fornecida uma janela pop-up de par de atualização 405 em que o cliente pode fornecer / alterar qualquer dos parâmetros de troca de par. Por exemplo, a janela 405 inclui campos de quantidade 407 em que as quantidades de compra e venda podem ser inseridas, campos de quantidade de onda mínima e máxima 409 e um campo de deslizamento 411. Além disso, o cliente pode usar a GUI da captura de tela 401 para modificar um comércio de pares recuperado do arquivo de troca de pares 17. Por exemplo, o cliente pode recuperar transações de pares passados ​​inserindo informações de referência em um campo de ticker 415 ou inserindo um intervalo de datas em um campo de intervalo de datas 417 e ativando um botão de consulta para recuperar os negócios do par passado que atendem aos critérios de pesquisa fornecidos. Os negócios do par passado recuperados são exibidos no quadro principal 403. Uma vez que um comércio de pares passado é recuperado e exibido no quadro principal 403, o cliente pode atualizar a janela pop-up dos pares 405 para fornecer / alterar qualquer dos parâmetros de troca de par.
Uma vez que o cliente entre as informações desejadas e ativa o botão "Atualização" 413, os parâmetros associados ao comércio de pares específico selecionado no quadro principal 403 refletem as atualizações fornecidas pelo cliente. Se os parâmetros para um determinado comércio de pares forem satisfatórios, o cliente poderá encaminhar uma solicitação de troca de pares com base no intercâmbio de pares selecionado para preencher o módulo de cumprimento 3 para realização. Em uma concretização exemplar, o cliente envia um comércio ativando um botão Adicionar ao portfólio 421.
Consequentemente, um método e um sistema são fornecidos para títulos de par de negociação em que os negócios de pares passados ​​são armazenados e disponibilizados para clientes em que os negócios futuros podem ser baseados. Também está incluída uma biblioteca de par para armazenar negociações de pares pré-definidas formuladas por um comerciante de pares qualificado que serve como um modelo para pedidos comerciais de pares de clientes. Ao fornecer transações de pares passados ​​e trocas de pares pré-definidas ao cliente, o cliente pode formular rapidamente um pedido de troca de par e encaminhar esse pedido para um módulo de preenchimento de comércio de par para cumprimento. Desta forma, o cliente pode tirar proveito de oportunidades de negociação em pares, mesmo em mercados em movimento rápido.
Várias formas de realização da presente invenção foram descritas. No entanto, entender-se-á que podem ser feitas várias modificações sem se afastar do espírito e do alcance da invenção. Com base na descrição acima, será evidente para um especialista habilmente implementar o sistema e os métodos da presente invenção em um ou mais programas de computador que são executáveis ​​em um sistema programável incluindo pelo menos um processador programável acoplado para receber dados e instruções de e para transmitir dados e instruções para, um sistema de armazenamento de dados, pelo menos um dispositivo de entrada e pelo menos um dispositivo de saída. Cada programa de computador pode ser implementado em uma linguagem de programação processual ou orientada a objetos de alto nível, ou em linguagem de montagem ou máquina, se desejar; e, em qualquer caso, o idioma pode ser uma linguagem compilada ou interpretada. Os processadores adequados incluem, a título de exemplo, microprocessadores de propósito geral e especiais. Além disso, as formas de realização alternativas da invenção que implementam o sistema em hardware, firmware ou uma combinação de hardware e software, bem como a distribuição de módulos e / ou dados de uma maneira diferente, serão evidentes para os especialistas na técnica e também estão dentro de o escopo da invenção. Além disso, será evidente para um especialista usar um sistema convencional de gerenciamento de banco de dados, como, por exemplo, não-limitativo, Sybase, Oracle e DB2, como uma plataforma para implementar o presente invento. Além disso, os dispositivos de acesso à rede podem incluir um computador pessoal executando um sistema operacional, como Microsoft Windows ™, Unix ™ ou Apple Mac OS ™, bem como aplicativos de software, como um programa JAVA ou um navegador da Web. Acesse dispositivos 7 e também pode ser um dispositivo terminal, um computador tipo palma, dispositivo móvel de acesso WEB ou outro dispositivo que possa aderir a um protocolo de comunicação ponto-a-ponto ou de rede, como o protocolo Internet. Computadores e dispositivos de acesso à rede podem incluir um processador, RAM e / ou memória ROM, uma capacidade de exibição, um dispositivo de entrada e disco rígido ou outro armazenamento relativamente permanente. Consequentemente, outras formas de realização estão dentro do âmbito das reivindicações seguintes.
Verifica-se assim que os objetos acima expostos, dentre os evidenciados a partir da descrição anterior, são alcançados de forma eficiente e, uma vez que podem ser feitas algumas mudanças na realização do processo acima, em um produto descrito e na construção estabelecida sem se afastar do espírito e do alcance da invenção, pretende-se que toda a matéria contida na descrição acima mostrada no desenho que acompanha deve ser interpretada como ilustrativa e não num sentido limitativo.
Também deve ser entendido que as seguintes reivindicações destinam-se a abranger todas as características genéricas e específicas da invenção aqui descritas, e todas as afirmações do escopo da invenção, que, como uma questão de linguagem, podem ser ditas cair entre eles.

O segredo para encontrar lucro na negociação de pares.
"Quants" é o nome de Wall Street para pesquisadores de mercado que usam análise quantitativa para desenvolver estratégias comerciais lucrativas. Em suma, um quant combina com os índices de preços e as relações matemáticas entre empresas ou veículos comerciais, a fim de divisar as oportunidades comerciais rentáveis. Durante a década de 1980, um grupo de quants trabalhando para Morgan Stanley atingiu o ouro com uma estratégia chamada comércio de pares. Investidores institucionais e mesas de negociação proprietárias em grandes bancos de investimento estão usando a técnica desde então, e muitos fizeram um lucro arrumado com a estratégia.
Raramente é no melhor interesse dos banqueiros de investimento e dos gestores de fundos mútuos compartilhar estratégias de negociação rentáveis ​​com o público, de modo que o comércio de pares continuou sendo um segredo dos profissionais (e alguns indivíduos hábeis) até o advento da internet. O comércio on-line abriu a tampa em informações financeiras em tempo real e deu acesso aos novatos a todos os tipos de estratégias de investimento. Não demorou muito para o comércio de pares atrair investidores individuais e comerciantes de pequeno porte que buscam proteger sua exposição de risco aos movimentos do mercado mais amplo.
O objetivo é combinar dois veículos comerciais que estão altamente correlacionados, negociando um longo e o outro curto quando a relação de preço do par diverge o número "x" de desvios padrão - "x" é otimizado usando dados históricos. Se o par reverte para sua tendência média, um lucro é feito em uma ou ambas as posições.
O primeiro passo na concepção de um comércio de pares é encontrar dois estoques altamente correlacionados. Normalmente isso significa que as empresas estão na mesma indústria ou subsector, mas nem sempre. Por exemplo, os estoques de rastreamento de índices, como o QQQQ (Nasdaq 100) ou o SPY (S & amp; P 500), podem oferecer excelentes oportunidades de negociação de pares. Dois índices que, em geral, comercializam juntos são S & amp; P 500 e Dow Jones Utilities Average. Este gráfico de preços simples dos dois índices demonstra sua correlação:
Para o nosso exemplo, analisaremos duas empresas altamente correlacionadas: GM e Ford. Como ambos são fabricantes de automóveis americanos, seus estoques tendem a se mover juntos.
Abaixo está um gráfico semanal da relação de preço entre Ford e GM (calculado dividindo o preço das ações da Ford pelo preço das ações da GM). Essa relação de preço às vezes é chamada de "desempenho relativo" (não deve ser confundida com o índice de força relativa, algo completamente diferente). A linha branca central representa a relação preço médio nos últimos dois anos. As linhas amarelas e vermelhas representam um e dois desvios padrão da razão média, respectivamente.
No gráfico abaixo, o potencial de lucro pode ser identificado quando o índice de preços atinge seu primeiro ou segundo desvio. Quando ocorrem essas divergências lucrativas, é hora de assumir uma posição longa no desempenho inferior e uma posição curta no overachiever. A receita da venda curta pode ajudar a cobrir o custo da posição longa, tornando o comércio de pares barato para colocar. O tamanho da posição do par deve ser combinado com o valor do dólar em vez do número de ações; desta forma, um movimento de 5% em um é igual a um movimento de 5% na outra. Tal como acontece com todos os investimentos, existe o risco de que os negócios possam se mover para o vermelho, por isso é importante determinar os pontos de parada-perda otimizados antes de implementar o comércio de pares.
Um Exemplo Usando Contratos Futuros.
Um comércio de pares no mercado de futuros pode envolver uma arbitragem entre o contrato de futuros e a posição de caixa de um determinado índice. Quando o contrato de futuros fica à frente da posição de caixa, um comerciante pode tentar lucrar com o curto prazo do futuro e passar muito tempo no estoque de rastreamento do índice, esperando que eles se juntem em algum momento. Muitas vezes, os movimentos entre um índice ou commodity e seu contrato de futuros são tão apertados que os lucros são deixados apenas para os comerciantes mais rápidos - muitas vezes usando computadores para executar automaticamente enormes posições em um piscar de olhos.
Um Exemplo de Opções de Uso.
Evidência de Rentabilidade.
Os interessados ​​na técnica de negociação de pares podem encontrar mais informações e instruções no livro Pairs Trading da Ganapathy Vidyamurthy: métodos quantitativos e análise, que você pode encontrar aqui.

Sistema e método de troca de par
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CAMPO TÉCNICO.
As concretizações da divulgação referem-se geralmente a sistemas de negociação financeira e, mais especificamente, a um sistema e método de troca de pares.
FUNDO.
Pairs trading é uma estratégia usada por um comerciante para gerar um retorno sobre o investimento ao prever um spread entre dois títulos relacionados, tipicamente no mesmo setor, que tendem a se mover juntos, onde o comerciante assume uma posição longa e uma posição curta nos dois títulos relacionados no par.
Tradicionalmente, a negociação de pares é realizada entre valores mobiliários no mesmo mercado ou, quando se trata de opções, usando a mesma garantia subjacente. No entanto, atualmente não há um sistema de negociação que ofereça negociação em pares de títulos não relacionados de diferentes classes de ativos. Assim, os comerciantes que desejam negociar títulos não relacionados, possivelmente em diferentes classes de ativos, só podem fazê-lo enviando ordens separadas para cada um dos títulos não relacionados com a esperança de executar ambos os pedidos nos parâmetros de destino no período desejado. Infelizmente, a abordagem de ordem separada para a realização de um comércio de pares expõe os comerciantes a riscos inerentes à perna e à fragmentação da liquidez.
Consequentemente, há uma necessidade de uma plataforma de negociação adaptada para troca de pares de títulos não relacionados a partir de uma ou mais classes de ativos usando um movimento de preço único fornecido por uma abordagem de ordem única.
A presente divulgação fornece métodos e sistemas implementados por computador para realizar negociações de pares. Numa concretização exemplar, um método implementado pelo computador de acordo com a presente descrição pode incluir a apresentação de uma pluralidade de pares predefinidos de artigos não relacionados, recebendo uma selecção de um par predefinido a partir dos pares predefinidos para uma ordem de comércio de pares, entrando na ordem de troca de pares como uma única ordem em um livro de pedidos, determinando se os parâmetros de ordem associados a uma primeira perna e uma segunda perna do par predefinido foram cumpridos e, em seguida, executando a ordem de troca de pares quando os parâmetros de ordem associados às referidas primeira e segunda pernas são ambos atendidos .
Noutra concretização exemplar, um método implementado pelo computador de acordo com a presente descrição pode incluir receber uma solicitação para emparelhar pelo menos duas pernas de títulos não relacionados, cada uma associada a uma classe de ativos diferente, identificando uma primeira segurança de uma primeira classe de ativos associada a uma primeira perna, identificando uma segunda garantia de uma segunda classe de ativos associada a uma segunda autorização, determinando se a primeira e segunda pernas formam um par negociável e criando o par de títulos não relacionados, onde o par solicitado é representado por um identificador exclusivo.
Um sistema exemplar de acordo com a presente descrição pode incluir um componente de memória e um componente de processamento configurado para executar e implementar as várias etapas de processamento e características descritas acima e ao longo desta descrição.
BREVE DESCRIÇÃO DOS DESENHOS.
A presente descrição é ilustrada a título de exemplo, e não a título de limitação, e tornará-se evidente após a consideração da descrição detalhada que se segue, em conjunto com os desenhos anexos, em que os caracteres de referência semelhantes referem-se a partes semelhantes ao longo e em qual:
FIG. 1 is a block diagram illustrating an exemplary computer network in which embodiments of the present disclosure may operate.
FIG. 2 is a flow diagram illustrating an embodiment of a method for pairing unrelated securities from one or more asset classes.
FIG. 3 is a flow diagram illustrating an embodiment of a method for trading pairs of unrelated securities from one or more asset classes.
FIG. 4 illustrates a diagrammatic representation of a machine in the exemplary form of a computer system.
DESCRIÇÃO DETALHADA.
Embodiments of the disclosure provide a system and methods for conducting cash equities pairs trading.
In the following description, numerous details are set forth. It will be apparent, however, to one skilled in the art, that the present disclosure may be practiced without these specific details. In some instances, well-known structures and devices are shown in block diagram form, rather than in detail, in order to avoid obscuring the present disclosure.
Some portions of the detailed descriptions are presented in terms of algorithms and symbolic representations of operations on data bits within a computer memory. These algorithmic descriptions and representations are the means used by those skilled in the data processing arts to most effectively convey the substance of their work to others skilled in the art. An algorithm is here, and generally, conceived to be a self-consistent sequence of steps leading to a desired result. The steps are those requiring physical manipulations of physical quantities. Usually, though not necessarily, these quantities take the form of electrical or magnetic signals capable of being stored, transferred, combined, compared, and otherwise manipulated. It has proven convenient at times, principally for reasons of common usage, to refer to these signals as bits, values, elements, symbols, characters, terms, numbers, or the like.
It should be borne in mind, however, that all of these and similar terms are to be associated with the appropriate physical quantities and are merely convenient labels applied to these quantities. Unless specifically stated otherwise, as apparent from the above discussion, it is appreciated that throughout the description, discussions utilizing terms such as “receiving”, “determining”, “creating”, “presenting”, “selecting”, “routing”, “matching”, “executing”, “filling”, “canceling”, “processing”, or the like, refer to the action and processes of a computer system, or similar electronic computing device, that manipulates and transforms data represented as physical (electronic) quantities within the computer system's registers and memories into other data similarly represented as physical quantities within the computer system memories or registers or other such information storage, transmission or display devices.
The present disclosure also relate to an apparatus for performing the operations herein. This apparatus may be specially constructed for the required purposes or it may comprise a general purpose computer selectively activated or reconfigured by a computer program stored in the computer. Such a computer program may be stored in a computer readable storage medium, such as, but not limited to, any type of disk including floppy disks, optical disks, CD-ROMs and magnetic-optical disks, read-only memories (ROMs), random access memories (RAMs), EPROMs, EEPROMs, magnetic or optical cards, flash memory devices including universal serial bus (USB) storage devices (e. g., USB key devices) or any type of media suitable for storing electronic instructions, each of which may be coupled to a computer system bus.
The algorithms and displays presented herein are not inherently related to any particular computer or other apparatus. Various general purpose systems may be used with programs in accordance with the teachings herein or it may prove convenient to construct more specialized apparatus to perform the required method steps. The required structure for a variety of these systems will be apparent from the description above. In addition, the present disclosure is not described with reference to any particular programming language. It will be appreciated that a variety of programming languages may be used to implement the teachings of the disclosure as described herein.
The present disclosure may be provided as a computer program product, or software, that may include a machine-readable medium having stored thereon instructions, which may be used to program a computer system (or other electronic devices) to perform a process according to the present disclosure. A machine-readable medium includes any mechanism for storing or transmitting information in a form readable by a machine (e. g., a computer). For example, a machine-readable (e. g., computer-readable) medium includes a machine (e. g., a computer) readable storage medium (e. g., read only memory (“ROM”), random access memory (“RAM”), magnetic disk storage media, optical storage media, flash memory devices, etc.), a machine (e. g., computer) readable transmission medium (non-propagating electrical, optical, or acoustical signals), etc.
FIG. 1 is a block diagram illustrating an exemplary computer network 100 in which embodiments of the present disclosure may operate. Referring to FIG. 1, computer network 100 may be comprised of a pairs trading platform 130 , a plurality of trader computing devices 122 A - 122 N adapted to conduct trades, which may be collectively referred to herein as trading entities 120 , and market systems associated with regulating trading of a plurality of asset classes such as ETFs 142 , equities 144 , commodities 146 or any other suitable asset class, all of which may be collectively referred to herein as asset classes 140 . In one embodiment, the computing devices of trading entities 120 and the market systems of asset classes 140 may be communicatively coupled to one or more networks (not shown) for transmitting and receiving trading-related data. Networks may be a private network (e. g., a local area network (LAN), wide area network (WAN), intranet, etc.) or a public network (e. g., the Internet).
Pairs trading platform 130 may be comprised of one or more modules configured lo enable and process orders relating to request for pairs trades received from trader entities 120 . For example, pairs trading platform 130 may be comprised of a pairing module 132 and a trading engine module 134 , order books module 136 . Pairing module 132 may be configured to manage all aspects of creating and making available pre-defined pairs of unrelated securities for selection and trading by trader entities 120 . Trading engine module 134 may be configured to manage all aspects of routing and matching pairs trading orders received from trader entities 120 . Order books module 136 may be configured to manage all aspects of identifying and communicating with order books associated with the legs representing each of the securities in the pairs trade order received from trader entities 120 .
Those skilled in the art will appreciate that pairs trading platform 130 may be configured with more or less modules to conduct the pairs trading methods described herein with reference to FIGS. 2 and 3. As illustrated in FIGS. 2 and 3, each of corresponding methods 200 and 300 may be performed by processing logic that may comprise hardware (e. g., circuitry, dedicated logic, programmable logic, microcode, etc.), software (such as instructions run on a processing device), or a combination thereof. In one embodiment, methods 200 and 300 may be performed by one or more processing components associated with modules 132 , 134 and 136 of pairs trading platform 130 .
FIG. 2 is a flow diagram illustrating a method 200 for pairing unrelated securities from one or more asset classes, according to an embodiment of the disclosure. Referring to FIG. 2, method 200 may be initiated upon receiving, at step 202 , a request to pair two legs of unrelated securities from different asset classes. For example, a request may comprise pairing of Apple (AAPL) stock and Technology Select Sector SPDR (XLK), two unrelated securities from different asset classes (i. e., an equity and an ETF). In another embodiment, two legs of unrelated securities from the same asset class may also be paired. For example, a request may comprise pairing of SPDR Gold Shares (GLD) and SPDR S&P 500 (SPY), two unrelated securities from a related asset class (i. e., ETFs).
Upon receiving a request to pair unrelated securities, an initial determination may be made, at step 204 , to ascertain whether legs representative of each of the securities in the requested pairing may be traded together. For example, pairing module 132 may check whether trading engine module 134 is configured to accommodate both legs of the unrelated securities identified in the requested pairing. If an affirmative determination is made at step 204 , then a second determination may be made, at step 206 , to ascertain whether sufficient liquidity is present in connection with each of die unrelated securities to accommodate the requested pairing. If an affirmative determination is made at step 206 , then a third determination may be made, at step 208 , to ascertain whether an interesting relationship (e. g., criteria defining investor demand levels, trading patterns between the unrelated securities or any other applicable measure) exists between each of the unrelated securities to accommodate the requested pairing. Determinations relating to the presence of sufficient liquidity and an interesting relationship may be based on market-driven data received, for example, by pairs trading module 130 .
When an affirmative determination is made at steps 204 , 206 and 208 , then the requested pairing of unrelated securities may be created, at step 210 , and made available for selection by trader entities 120 . However, if one or more of the determinations made at steps 204 , 206 and 208 are not affirmed, then pairing module 132 may be configured to deny, at step 212 , the requesting pairing.
FIG. 3 is a flow diagram illustrating a method 300 for trading pairs of unrelated securities from one or more asset classes, according to an embodiment of the disclosure. Referring to FIG. 3, method 300 may be initiated upon presenting, at step 302 , predefined pairs of unrelated securities from one or more asset classes. Selection of a predefined pair may be received, at step 304 , to open a pairs trade order. For example, trading entities 120 may search and select from a listing of predefined pairs of unrelated securities that are available for trading via pairs trading platform 130 .
After a predefined pair is selected and a corresponding pairs trade order is opened, the trade order may be routed, at step 306 , to a pairs order book for orders received in connection with the predefined pair selected. For example, the securities GLD and SPY may be provided as a predefined pair identified as “GLDSPY” and, upon selection, may be routed to a pairs order book provided for receiving orders relating to GLDSPY. Although the trade order is comprised of legs representative of each of the underlying securities in the predefined pair, it is received by the corresponding pairs order book as a single trade order (i. e., not separate orders for each leg in the pair).
Once the pairs trade order is entered into the corresponding pairs order book, an attempt may then be made, at step 308 , to match order parameters associated with each leg of the paired securities. In one embodiment, pairs trading platform 130 may attempt to match order parameters for each leg of the paired securities using other pairs trade orders in the pairs order book meeting the order parameters. In another embodiment, pairs trading platform 130 may attempt to match order parameters through order books corresponding to the security represented by each leg in the pair.
A determination may be made, at step 310 , to ascertain whether order parameters of both legs are met. If, and only if, order parameters associated with each leg of the paired securities are met, then may the pairs trade order be filled, at step 316 , thereby making a pairs trade order transaction riskless from an execution standpoint. If, however, order parameters associated with either leg of the paired securities are not met, then a determination may be made, at step 312 , to ascertain whether a time limit for conducting the pairs trade has expired. If the time period has not expired, pairs trading platform 130 may continue to attempt, at step 308 , matching the pairs trade order. If the time period has expired and the pairs trade order is not filled, the pairs trade order may be canceled, at step 314 .
It should be noted that the sequence of operations described in conjunction with methods 200 and 300 may be different from that illustrated, respectively, in corresponding FIGS. 2 and 3. For example, the operations at step 208 may be executed before the operations at step 206 , as illustrated in method 200 of FIG. 2.
FIG. 4 illustrates a diagrammatic representation of a machine in the exemplary form of a computer system 400 within which a set of instructions, for causing the machine to perform any one or more of the methodologies discussed herein, may be executed. In alternative embodiments, the machine may be connected (e. g., networked) to other machines in a local area network (LAN), an intranet, an extranet, or the Internet. The machine may operate in die capacity of a server or a client machine in a client-server network environment, or as a peer machine in a peer-to-peer (or distributed) network environment. The machine may be a personal computer (PC), a tablet PC, a set-top box (STB), a personal digital assistant (PDA), a cellular telephone, a web appliance, a server, a network router, switch or bridge, or any machine capable of executing a set of instructions (sequential or otherwise) that specify actions to be taken by that machine. Further, while only a single machine is illustrated, the term “machine” shall also be taken to include any collection of machines that individually or jointly execute a set (or multiple sets) of instructions to perform any one or more of the methodologies discussed herein.
The exemplary computer system 400 may be comprised of a processing device 402 , a main memory 404 (e. g., read-only memory (ROM), flash memory, dynamic random access memory (DRAM) (such as synchronous DRAM (SDRAM) or Rambus DRAM (RDRAM), etc.), a static memory 406 (e. g., flash memory, static random access memory (SRAM), etc.), and a data storage device 418 , which communicate with each other via a bus 430 .
Processing device 402 represents one or more general-purpose processing devices such as a microprocessor, central processing unit, or the like. More particularly, the processing device may be complex instruction set computing (CISC) microprocessor, reduced instruction set computer (RISC) microprocessor, very long instruction word (VLIW) microprocessor, or processor implementing other instruction sets, or processors implementing a combination of instruction sets. Processing device 402 may also be one or more special-purpose processing devices such as an application specific integrated circuit (ASIC), a field programmable gate array (FPGA), a digital signal processor (DSP), network processor, or the like. Processing device 402 is configured to execute processing logic 426 for performing the operations and steps discussed herein.
Computer system 400 may further include a network interface device 408 . Computer system 400 also may include a video display unit 410 (e. g., a liquid crystal display (LCD) or a cathode ray tube (CRT)), an alphanumeric input device 412 (e. g., a keyboard), a cursor control device 414 (e. g., a mouse), and a signal generation device 416 (e. g., a speaker).
Data storage device 418 may include a machine-readable storage medium (or more specifically a computer-readable storage medium) 428 having one or more sets of instructions (e. g., software 422 ) embodying any one or more of the methodologies of functions described herein. For example, software 422 may store instructions to conduct a cash equities pairs trade. Software 422 may also reside, completely or at least partially, within main memory 404 and/or within processing device 402 during execution thereof by computer system 400 ; main memory 404 and processing device 402 also constituting machine-readable storage media. Software 422 may further be transmitted or received over a network 420 via network interface device 408 .
Machine-readable storage medium 428 may also be used to store instructions to conduct a cash equities pairs trade. While machine-readable storage medium 428 is shown in an exemplary embodiment to be a single medium, the term “machine-readable storage medium” should be taken to include a single medium or multiple media (e. g., a centralized or distributed database, and/or associated caches and servers) that store the one or more sets of instructions. The term “machine-readable storage medium” shall also be taken to include any medium that is capable of storing or encoding a set of instruction for execution by the machine and that causes the machine to perform any one or more of the methodologies of die present disclosure. The term “machine-readable storage medium” shall accordingly be taken to include, but not be limited to, solid-state memories, and optical and magnetic media.
Whereas many alterations and modifications of the present disclosure will no doubt become apparent to a person of ordinary skill in the art after having read the foregoing description, it is to be understood that any particular embodiment described and shown by way of illustration is in no way intended to be considered limiting. Therefore, references to details of various embodiments are not intended to limit the scope of the claims, which in themselves recite only those features regarded as the disclosure.

Pair trading system and method

This application is a divisional application of U. S. patent application Ser. No. 10/206,549, entitled “Pair trading system and method”, which was filed on Jul. 25, 2002 now U. S. Pat. No. 7,412,415, which claims priority to U. S. provisional patent application Ser. No. 60/334,163 entitled “Method and System for Trading Pairs of Securities” that was filed on Nov. 29, 2001. The contents of both applications are herein incorporated by reference.
The following invention relates to a system and method for trading securities and, in particular, for a system and method of trading securities in pairs.
A recognized strategy for trading securities is known as pair-trading. Pair-trading is a non-directional investment strategy in which the investor identifies two securities having similar characteristics and the securities are currently trading at a price relationship that is out of their historical trading range. The investor exploits the price relationship between the securities by buying the undervalued security while short-selling the overvalued security. Because pair-trading is a market-neutral strategy, it is a particularly desirable strategy for investing in volatile markets.
One context in which pair trading is useful is where an investor desires to take advantage of an arbitrage opportunity resulting from a merger between two companies. For example, Company A has announced a definitive agreement to acquire Company T in which case Company T shareholders will receive 0.5 shares of Company A stock for each share of Company T stock they own. The investor desires to capture the “spread” between the offered consideration (0.5 shares of A) and the price of T stock. To do this, the investor buys shares in T stock and sells shares of A stock.
For instance, if stock T is trading at $28 per share and stock A is trading at $60 per share, then the investor may execute a trade for 200,000 spreads by buying 200,000 shares of T stock and selling 100,000 shares of A stock. After the merger takes place, the investor will cover the short position in stock A with the 100,000 shares of A stock the investors receives in exchange of the 200,000 shares the investor held of stock T. Thus, by executing the pair trade, the investor locks in a $400,000 profit (assuming that the merger goes through). The process of executing a pair trade thus includes executing individual trades directed to each leg of the pair trade request. An example of a system for executing trades for filling a pair trade request is the Quantex system from ITG (itginc/products/quantex/quantex. html) of 380 Madison Avenue, New York, N. Y. 10017.
A challenge in implementing a pair trade is to find a counterparty for a particular position an investor desires to establish while minimizing “leg risk.” Typically, a large pair trade is performed “off the market” as a private transaction negotiated by a financial institution that services large clients. For example, if an investor desires to execute a pair trade betting that a proposed merger between two companies will go through, the investor would approach a financial institution seeking an investor that is willing to bet against the merger. The financial institution then acts as an intermediary between the two investors in which the investors establish equal and opposite positions in the stock of the proposed merger partners thereby completing the pair trade. Thus by matching two pair trade requests so that the transactions associated with each of the pair trade legs are executed simultaneously, neither investor is exposed to leg risk that would otherwise result for the period of time between execution of the first leg and the second leg of the pair trade.
There are numerous drawbacks associated with the prevalent pair-trading practice. First, pair-trading is typically limited to clients of large financial institutions that have the ability to identify suitable counterparties for a particular pair trade. This is especially the case when the pair trade involves a large amount of stock or illiquid stocks in which the only way to execute the trade and minimize leg risk is via an “off the market” transaction negotiated by a financial institution. Also, because a pair-trade is typically negotiated by the parties with a financial institution as an intermediary, the process is often slow and inefficient. Furthermore, pair-trading under current practice is generally best suited for large clients seeking to establish large positions thereby providing the financial institutions with the economic incentive to execute the transaction. Smaller clients, however, must rely on the markets for executing pair trades, which is unsuitable for illiquid stocks and also results in increased leg risk.
Accordingly, it is desirable to provide a system and method for trading securities in pairs.
SUMARIO DA INVENÇÃO.
The present invention is directed to overcoming the drawbacks of the prior art pair trading practices. Under the present invention a method is provided for fulfilling a pair trade request and includes the steps of receiving a plurality of pair trade requests; executing a transaction for a first portion of one of the plurality of pair trade requests and matching a second portion of the one of the plurality of pair trade requests against another of the plurality of pair trade requests.
In an exemplary embodiment, the method includes the step of executing a transaction for a first portion of one of the plurality of pair trade requests in an external market.
In another exemplary embodiment, the method includes the step of executing a transaction for a first portion of one of the plurality of pair trade requests against the order inventory.
In yet another exemplary embodiment, the pair trade request includes a first security having a bid price and an ask price and a second security having a bid price and an ask price, and the method includes the steps of determining whether the bid price of the first security and the bid price of the second security meet a spread limit; determining an amount of the second security that can be sold based on a bid size associated with the second security; calculating an equivalent amount of the first security that can be bought based on the amount of the second security that can be sold; adjusting the equivalent amount of the first security based on adjustment criteria; calculating a purchase price for the adjusted equivalent amount of the first security based on the spread limit; executing an initiating order to buy the adjusted equivalent amount of the first security at the purchase price and executing a covering order to sell the amount of the second security.
In still yet another exemplary embodiment, the method includes the step of executing a covering order to sell the amount of the second security at the bid price of the second security.
In an exemplary embodiment, the method includes the steps of determining whether the ask price of the first security and the ask price of the second security and/or the bid price of the first security and the bid price of the second security meet a spread limit; determining an amount of the first security that can be bought based on an offer size associated with the first security; calculating an equivalent amount of the second security that can be sold based on the amount of the second security that can be bought; adjusting the equivalent amount of the second security based on adjustment criteria; calculating a selling price for the adjusted equivalent amount of the second security based on the spread limit; executing an initiating order to sell the adjusted equivalent amount of the second security at the selling price and executing a covering order to purchase the amount of the first security.
In another exemplary embodiment, the method includes the step of executing a covering order to purchase the amount of the first security at the ask price of the first security.
In yet another exemplary embodiment, the adjustment criteria include a minimum amount and a maximum amount.
In still yet another exemplary embodiment, the method includes the step of rounding the initiating order to a round lot size.
In an exemplary embodiment, the method includes the step of executing a first portion of one of the plurality of pair trade requests in a plurality of tranches.
In another exemplary embodiment, the one of the plurality of pair trade requests and the another of the plurality of pair trade requests include a first security and a second security, the one of the plurality of pair trade requests has a first spread limit and the another of said plurality of trade requests has a second spread limit and wherein the method includes the steps of determining that a range of the first spread limit and the second spread limit overlaps with a market spread; setting a spread level; calculating prices for the first security and the second security that are within the market spread and based on the spread level and matching the second portion of the one of the plurality of pair trade requests against another of the plurality of pair trade requests based on the calculated prices.
In yet another exemplary embodiment, the method includes the steps of calculating a mean between the first spread limit and the second spread limit and setting the spread level as the mean if the mean is within the market spread.
In still yet another exemplary embodiment, the method includes the step of identifying a spread amount that is closest to the mean and within the market spread and setting the spread level as the spread amount if the mean is not within the market spread.
In an exemplary embodiment, the one of the plurality of pair trade requests and the another of the plurality of pair trade requests include a first security and a second security, the one of the plurality of pair trade requests has a first spread limit, a buy ratio and a sell ratio, the another of the plurality of trade requests has a second spread limit, a buy ratio and a sell ratio and the method includes the steps of determining that the buy ratio and the sell ratio associated with the one of the plurality of trade requests does not equal the buy ratio and the sell ratio of the another of the plurality of trade requests and that an overlap exists between range of the first spread limit and the second spread limit and a market spread; determining that market prices exist that are within the overlap; determining a mismatch amount in the second security based on a difference between the buy ratio and the sell ratio associated with the one of the plurality of trade requests and the buy ratio and the sell ratio of the another of the plurality of trade requests; calculating a cross amount for the first security and the second security; selecting a crossing price for the first security and the second security that is within the overlap; determining that the mismatch amount is available at the crossing price for the second security; matching the second portion of the one of the plurality of pair trade requests against another of the plurality of pair trade requests based on the calculated prices and executing a transaction for the mismatch amount of the second security at the crossing price for the second security.
In another exemplary embodiment, the method includes the step of determining that the mismatch amount is available in an external market at the crossing price for the second security.
In yet another exemplary embodiment, the method is performed by a financial institution having order inventory and includes the step of determining that the mismatch amount is available in the order inventory at the crossing price for the second security.
In still yet another exemplary embodiment, the one of the plurality of pair trade requests and the another of the plurality of pair trade requests indicate a number of spreads and the method includes the step of matching a second portion of the one of the plurality of pair trade requests against another of the plurality of pair trade requests if the number of spreads is greater than a minimum number of spreads.
In an exemplary embodiment, the method includes the step of receiving a preference for filling at least some of the plurality of trade requests via the step of executing a transaction for a first portion of one of the plurality of pair trade requests, described above.
In another exemplary embodiment, the method includes the step of receiving a preference for filling at least some of the plurality of trade requests via the step of matching a second portion of the one of the plurality of pair trade requests against another of the plurality of pair trade requests, described above.
Under the present invention, a method for fulfilling a pair trade request is provided and includes the steps of receiving a plurality of pair trade requests and matching at least a portion of one of the plurality of pair trade requests against another of the plurality of pair trade requests.
Under the present invention, a system for fulfilling a pair trade request is provided, the system receiving a plurality of pair trade requests and includes a pair trading engine for executing a transaction for a first portion of one of the plurality of pair trade requests. The system also includes a pair crossing network for matching a second portion of said one of the plurality of pair trade requests against another of the plurality of pair trade requests.
In an exemplary embodiment, the system includes a link to external markets and wherein the pair trading engine executes the transaction for the first portion of one of the plurality of pair trade requests in the external markets.
In another exemplary embodiment, the system includes a financial institution having an order inventory and wherein the pair trading engine executes the transaction for the first portion of one of the plurality of pair trade requests against the order inventory.
In yet another exemplary embodiment, the pair trade request includes a first security having a bid price and an ask price and a second security having a bid price and an ask price, and wherein the pair trading engine determines whether the bid price of the first security and the bid price of the second security meet a spread limit; determines an amount of the second security that can be sold based on a bid size associated with the second security; calculates an equivalent amount of the first security that can be bought based on the amount of the second security that can be sold; adjusts the equivalent amount of the first security based on adjustment criteria; calculates a purchase price for the adjusted equivalent amount of the first security based on the spread limit; executes an initiating order to buy said adjusted equivalent amount of the first security at the purchase price and executes a covering order to sell the amount of the second security.
In still yet another exemplary embodiment, the pair trading engine executes a covering order to sell the amount of the second security at the bid price of the second security.
In an exemplary embodiment, the pair trading engine determines whether the ask price of the first security and the ask price of the second security meet a spread limit; determines an amount of the first security that can be bought based on an offer size associated with the first security; calculates an equivalent amount of the second security that can be sold based on the amount of the second security that can be bought; adjusts said equivalent amount of the second security based on adjustment criteria; calculates a selling price for the adjusted equivalent amount of the second security based on the spread limit; executes an initiating order to sell the adjusted equivalent amount of the second security at the selling price; and executes a covering order to purchase the amount of the first security.
In another exemplary embodiment, the pair trading engine executes a covering order to purchase the amount of the first security at the ask price of the first security.
In yet another exemplary embodiment, the pair trading engine rounds the initiating order to a round lot size.
In still yet another exemplary embodiment, the pair trading engine executes a first portion of one of the plurality of pair trade requests in a plurality of tranches.
In an exemplary embodiment, the one of the plurality of pair trade requests and the another of the plurality of pair trade requests include a first security and a second security, the one of the plurality of pair trade requests has a first spread limit and the another of the plurality of trade requests has a second spread limit and wherein the pair crossing network determines that a range of the first spread limit and the second spread limit overlaps with a market spread; sets a spread level; calculates prices for the first security and the second security that are within the market spread and based on the spread level; and matches the second portion of said one of the plurality of pair trade requests against another of the plurality of pair trade requests based on the calculated prices.
In another exemplary embodiment, the pair crossing network calculates a mean between the first spread limit and the second spread limit and sets the spread level as the mean if the mean is within the market spread.
In yet another exemplary embodiment, the pair crossing network identifies a spread amount that is closest to the mean and within the market spread and sets the spread level as the spread amount if the mean is not within the market spread.
In still yet another exemplary embodiment, the one of said plurality of pair trade requests and the another of the plurality of pair trade requests include a first security and a second security, the one of the plurality of pair trade requests has a first spread limit, a buy ratio and a sell ratio, the another of the plurality of trade requests has a second spread limit, a buy ratio and a sell ratio and wherein the pair crossing network determines that the buy ratio and the sell ratio associated with the one of the plurality of trade requests does not equal the buy ratio and the sell ratio of the another of the plurality of trade requests and that an overlap exists between range of the first spread limit and the second spread limit and a market spread; determines that market prices exist that are within the overlap; determines a mismatch amount in the second security based on a difference between the buy ratio and the sell ratio associated with the one of the plurality of trade requests and the buy ratio and the sell ratio of the another of the plurality of trade requests; calculates a cross amount for the first security and the second security; selects a crossing price for the first security and the second security that is within said overlap; determines that the mismatch amount is available at the crossing price for the second security; matches the second portion of the one of the plurality of pair trade requests against another of the plurality of pair trade requests based on the calculated prices; and executes a transaction for the mismatch amount of the second security at the crossing price for the second security.
In an exemplary embodiment, the pair crossing network determines that the mismatch amount is available in an external market at the crossing price for the second security.
In another exemplary embodiment, the pair crossing network determines that the mismatch amount is available in the order inventory at the crossing price for the second security.
In yet another exemplary embodiment, the one of said plurality of pair trade requests and the another of the plurality of pair trade requests indicate a number of spreads and wherein the pair crossing network matches a second portion of the one of the plurality of pair trade requests against another of the plurality of pair trade requests if the number of spreads is greater than a minimum number of spreads.
In still yet another exemplary embodiment, the plurality of pair trade requests include at least some pair trade requests indicating a preference for execution via said pair crossing network, and the system further includes a portfolio manager in communications with the pair crossing network, the portfolio manager receiving the plurality of pair trade requests and routing the at least some pair trade requests to the pair crossing network according to the preference.
In an exemplary embodiment, the system includes a pair trading engine for executing at least some of the plurality of pair trade requests, further includes a portfolio manager in communications with the pair trading engine and wherein the plurality of pair trade requests include at least some pair trade requests indicating a preference for execution via the pair trading engine, the portfolio manager receiving the plurality of pair trade requests and routing the at least some of the plurality of trade requests to the pair trading engine according to the preference.
Under the present invention, a system for fulfilling a pair trade request is provided, wherein the system receives a plurality of pair trade requests and includes a pair crossing network for matching at least one of the plurality of pair trade requests against another of the plurality of pair trade requests.
Accordingly, a method and a system are provided for trading pair securities.
The invention accordingly comprises the features of construction, combination of elements and arrangement of parts that will be exemplified in the following detailed disclosure, and the scope of the invention will be indicated in the claims. Other features and advantages of the invention will be apparent from the description, the drawings and the claims.
DESCRIPTION OF THE DRAWINGS.
For a fuller understanding of the invention, reference is made to the following description taken in conjunction with the accompanying drawings, in which:
FIG. 1 is a block diagram of a system for trading securities in pairs according to the present invention;
FIG. 2 is a flowchart of the steps a pair trading engine included in the system of FIG. 1 applies to fill a pair trade request;
FIG. 3 is a flowchart of the steps a pair crossing network included in the system of FIG. 1 applies to fill a pair trade request;
FIG. 4 is a flowchart of a process by which the pair crossing network of the system of FIG. 1 fills imperfectly matched orders; e.
FIG. 5 is a graph for identifying the market prices for two securities that meet the required spread limits.
DESCRIÇÃO DETALHADA DAS FORMAS DE REALIZAÇÃO PREFERIDAS.
Referindo-se agora à FIG. 1 , there is shown a block diagram of a system 1 for trading securities in pairs according to the present invention. System 1 receives pair trade requests from clients operating client access devices 7 and attempts to fill the pair trade requests according to the parameters associated with the particular pair trade request. System 1 includes two different subsystems for filling pair trade requests: a pair trading engine 3 and a pair crossing network 5 . As will be described below, pair trading engine 3 receives a pair trade request and attempts to fill (in whole or in part) the trade request by executing the appropriate trades in an external market 13 (that may include, by way of non-limiting example, the New York Stock Exchange, the NASDAQ or any other financial market). Pair trading engine 3 may also fill (in whole or in part) a pair trade request by executing a transaction against order inventory 11 of (non-pair) trade requests controlled by the financial institution that is operating system 1 . In addition, pair trading engine may also fill (in whole or in part) a pair trade request by forwarding the trade request to pair crossing network 5 for matching with other pair trade requests.
Likewise, pair crossing network 5 receives a pair trade request and fulfills (in whole or in part) the request by matching it against another pair trade request received by pair crossing network 5 , by matching the request against inventory 11 controlled by the financial institution and/or by forwarding the trade request to pair trading engine 3 for execution in external markets 13 .
System 1 also includes a portfolio manager 9 (that may be, for example, a software program executing on a computer system) that receives the pair trade requests from client access device 7 and presents the trade request to either pair trading engine 3 , pair crossing network 5 or both, depending on the trade parameters set by the client. Also, the client may query portfolio manager 9 regarding the status of any pair trade request the client has presented to system 1 .
In operation, system 1 may fulfill a pair trade request either using pair trading engine 3 , or pair crossing network 5 , or a combination of the two. For example, a pair trade request received by system 1 may be completely filled by pair trading engine 3 as follows.
Assume a case where XYZ is taking over ABC and is offering 0.575 shares of XYZ for each ABC share and investor Arb wants to invest in the price difference between ABC stock and XYZ stock. To take advantage of the price difference, Arb wants to lock in the difference between the value offered (0.575*XYZ stock) and the value of ABC stock by buying ABC stock and selling XYZ stock subject to the condition that ABC−0.575 XYZ<=−$1.19 (i. e., Arb desires to capture a $1.19 difference between XYZ's takeover offer and ABC's share price).
In order to fill this pair trade, Arb presents a pair trade request to portfolio manager 9 (using client access device 7 ). The pair trade request typically includes a number of parameters that define the pair trade and that also may be used by portfolio manager 9 in determining how the pair trade request is to be filled. Arb typically indicates in the trade request the number of spreads the Arb desires to invest in and also provides a minimum and maximum share amount that he is willing to trade per tranche.
For example, Arb may indicate a desire to invest in 100,000 spreads and may only wish to trade the spread 3,000-8,000 shares at a time. Arb generally sets this tranche size range based on the liquidity and volatility of ABC stock and XYZ stock. Arb may set a larger minimum tranche size if ABC stock and XYZ stock are fairly liquid stocks because higher liquidity increases the likelihood that a larger tranche size will be executed. Arb may set a lower maximum tranche size if XYZ stock and ABC stock are volatile stocks so as to limit the “leg risk” associated with executing a pair trade.
Yet another pair trade parameter Arb provides is the spread limit (in the above case −1.19) which is the amount Arb desires to capture in the trade. Arb does not have to provide, however, the discrete prices at which trades for ABC and XYZ stock are to be executed as these prices are calculated by pair trading engine 3 (and/or pair crossing network 5 ), as will be described below.
Referindo-se agora à FIG. 2 , there is shown a flowchart describing the steps pair trading engine 3 applies to fill a pair trade request. The flowchart in FIG. 2 is based on the above example and the market data listed in Table 1 below.
Initially, in Step 201 , pair trading engine 3 determines whether the bid/bid prices or ask/ask prices of ABC and XYZ stock, respectively, meet the spread limit requirement of the particular pair trade request. In this case the bid/bid spread is −1.4375 ((122.50*0.575)−69) and the ask/ask spread is −1.1969 ((122.625*0.575)−69.3125) so that each spread is less than the spread limit of −1.19, as is required for this particular trade. Once it is determined that either the bid/bid spread or the ask/ask spread meets the spread limit, then in Step 202 , it is determined (as is indicated in Table 1) how much XYZ stock can be sold at the bid and how much ABC stock can be bought at the ask. In an exemplary embodiment, the client may specify whether the bid/bid spread, the ask/ask spread or either the bid/bid or the ask/ask spread must exceed the indicated spread limit for a transaction to proceed. If neither the bid/bid spread nor the ask/ask spread meets the spread limit, the process waits a period of time (for example 0.10 seconds) and returns to Step 201 to again test whether the bid/bid spread or the ask/ask spread meets the spread limit.
Next, in step 203 , an equivalent amount of stock that can be sent into the market (i. e., bought/sold in the market) is calculated for a spread based on the bid/bid price spread and/or the ask/ask price spread that meets the spread limit. In this example, if a maximum of 10,000 shares of XYZ stock can be sold into the market (i. e., the XYZ bid size) then, based on the ABC:XYZ ratio (of 1:0.575 in this case), a total of 17,391 (10,000/0.575) shares of ABC stock are to be bought in order to execute a balanced pair trade. Likewise, if a maximum of 1,500 shares of ABC stock can be bought in the market (i. e., the ABC ask size), then, based on the ABC:XYZ ratio (of 1:0.575 in this case), a total of 863 (1500×0.575) shares of XYZ stock are to be sold in order to execute a balanced pair trade.
Next, in Step 204 , the pair trade share amounts calculated in Step 203 are adjusted to conform to the wave maximum and minimum parameters (i. e., the maximum/minimum tranche size) included in the pair trade request as well as market round lot limits. In the above example, the amount of ABC shares to be bought that was calculated based on the XYZ bid size (i. e., 17,391) is first rounded to an even lot size (i. e., 17,400) and then reduced to the maximum tranche size of 8000. Also, the amount of XYZ shares to be offered that was calculated based on the ABC ask size (i. e., 863) is first rounded to an even lot size (i. e., 900) and then increased to 1,700 shares to meet the minimum tranche size of 3000 (3000×0.575=1777). In an exemplary embodiment the minimum and maximum tranche size is scaled by the particular ratio (for example, in the above case, the tranche sizes for XYZ stock is scaled by 0.575). In another embodiment, the maximum/minimum tranche size is used for each security in the pair trade request without scaling. In yet another exemplary embodiment, the pair trade request includes a separate maximum/minimum tranche for each security.
Once the share amounts for the pair trade are calculated, in Step 205 , the share prices that are needed to meet the spread limit of the pair trade request are calculated. For example, for a pair trade based on the bid/bid price spread, in order to meet the spread limit of $1.19 credit, the price at which ABC stock is to be bid should be no greater than $69.2475 ((122.50×0.575)−1.19) a share. Likewise, for a pair trade based on the ask/ask price spread, in order to meet the spread limit, the price at which XYZ stock is to be offered should be greater than or equal to $122.6130 ((69.3125+1.19)/0.575) a share.
Next, once the pair trade share amounts and share prices have been calculated, in Step 206 , pair trading engine 3 sends “initiating” orders to external markets 13 in order to fill the pair trade request. The initiating orders may include an initiating order for executing a pair trade based on the bid/bid spread (in this case a bid for 8,000 shares of ABC stock at $69.2475) and/or an initiating order for executing a pair trade based on the ask/ask spread (in this case an offer of 1,700 shares of XYZ stock at $122.6130).
Finally, as the initiating orders sent to external markets 13 in Step 207 get filled, pair trading engine 3 automatically sends into the market the covering side of the pair trade. So, for example, as the initiating order of buying 8,000 shares of ABC stock at $69.2475 gets filled, pair trading engine 3 sends an order to external markets 13 to sell 4,600 (8,000×0.575) shares of XYZ stock at $122.50.
In an exemplary embodiment, the client's pair trade request includes threshold amounts that indicate the amount of variance in stock price and/or share amount the client is willing to absorb. For example, if in the process of covering the initiating order the price of XYZ stock dips to $122.49 (in which case the spread limit of the pair trade would drop to 1.18), then pair trading engine 3 would still sell XYZ stock at the price of $122.49 if the $0.01 difference was within the threshold amount included in the pair trade request. Similarly, the pair trade request may include threshold amounts for any other pair trade parameter, including by way of non-limiting example, the number of spreads to be purchased and the tranche sizes. If, however, a particular threshold amount indicated by the client is exceeded for any given pair trade parameter, then pair trading engine 3 would attempt to cancel the initiating order and/or the covering order (that may be possible if the orders have not yet reached the market or have not yet been filled). In such a case, pair trading engine 3 would then repeat the above analysis for determining suitable initiating and cover orders.
To fill a pair trade request, pair trading engine 3 executes trades utilizing the method described above. Typically, pair trading engine 3 tranches a pair trade request and trades piece-meal in external markets 13 . In certain cases, however, it may be difficult to fill a trade request by executing several transactions in external markets 13 either because the pair trade request is for a very large number of spreads or includes stocks that are illiquid (in which cases pair trading engine 3 may be ineffective in filling the pair trade request). Also, in certain situations, a client wishing to remain anonymous may indicate in the pair trade request a preference that no orders be sent to external markets 13 . In these circumstances, portfolio manager 9 may route the particular pair trade request to pair crossing network 5 .
Referindo-se agora à FIG. 3 , there is shown a flowchart illustrating the steps pair crossing network 5 applies to fill a pair trade request. The flowchart in FIG. 3 is based on the above example and the market data listed in Table 2 below.
Continuing the previous example, assume the pair trade request issued by Arb for 100,000 spreads was half-filled by pair trading engine 3 . Also, assume that system 1 receives a pair trade request from Antiarb that indicates a desire to sell 30,000 shares of ABC and buy 17,200 shares (a ratio of 1:0.575) and also indicates a spread limit of 1.30 (i. e., (ABC−0.575XYZ)<=$1.30). In this case Arb and Antiarb's orders are complimentary in the primary order elements—securities, ratios and buy versus sell. Also, Antiarb is willing to pay $0.11 per spread more than Arb is demanding from the marketplace. Based on these parameters, there is an opportunity for Arb's and Antiarb's trade requests to be filled via pair crossing network 5 .
If Antiarb's pair trade request was marked for trading by pair trading engine 3 , then portfolio manager 9 sends Antiarb's order to pair trading engine 3 for execution. Pair trading engine 3 then sends the parameters of Antiarb's trade request, as well as all orders waiting for execution in pair trading engine 3 , to pair crossing network 5 . Pair crossing network 5 will recognize (as described above) that there is a crossing opportunity between Arb's order and Antiarb's order. In this case, pair crossing network 5 then directs pair trading engine 3 to suspend the execution of Antiarb's order in the amount that can be crossed by pair crossing network 5 (30,000 spreads in this case). In addition, pair trading engine 3 routes a cross amount of 30,000 spreads from Arb's order to pair crossing network 5 for crossing against Antiarb's order. At this point, the pair crossing network 5 crosses the Antiarb order against a portion of Arb's order, as follows.
Assume the prevailing market conditions at the time of the cross are as shown in Table 3. Furthermore, Table 3 indicates the XYZ Ratio-Adjusted Value for both the bid and ask prices based on the conversion ratio of 1:0.575. Based on the XYZ Ratio-Adjusted Values, a Bid:Ask Spread Range (i. e., the spread provided for a cross between the bid price of ABC stock and the XYZ Ratio-Adjusted ask price) of −1.3863 is calculated and an Ask:Bid Spread Range (i. e., the spread provided for a cross between the ask price of ABC stock and the XYZ Ratio-Adjusted bid price) of −1.05 is calculated.
To perform the cross, in Step 301 pair crossing network 5 first determines whether the range of spread limits associated with Arb's and Antiarb's trade requests (i. e., $1.30-$1.19) coincides with the range of the prevailing market spread ($1.3863-$1.05). In this example, the range of spread limits does coincide with the prevailing market spread because at least a portion of the spread limit range overlaps with a portion of the market spread. Thus, a cross can occur.
Next, in Step 302 , pair crossing network 5 calculates the mean of Arb's and Antiarb's spread order limit which is ($1.30+$1.19)/2=$1.245 and determines whether the mean is within the range of the market spread (i. e., $1.3863-$1.05). If it is, then in Step 303 , pair crossing network 5 calculates the prices at which to cross. The prices must be within the current markets for ABC stock and XYZ stock, and satisfy market uptick requirements (for short sales), and provide a spread that is equal to the spread level calculated above. For example, with the inside market for ABC stock at 70.00-70.25 and the inside market for XYZ stock at 124.00-124.15, a cross price of 70.11 for ABC stock and 124.096 for XYZ stock provides the spread of 1.2452 thereby meeting the requirement of both Arb's and Antiarb's trade request. Finally, in Step 304 , pair crossing network 5 crosses 30,000 shares of ABC stock at $70.11 (with Arb buying and Antiarb selling) and 17,200 shares of XYZ at $124.096 (with Arb selling and Antiarb buying).
If it is determined in Step 302 that the mean of Arb's and Antiarb's spread order limits does not fall within the range of the market spread, then in Step 305 , the spread closest to the mean of the two spread limits that is also within the market spread is calculated. For example, if the market spread is $1.3863-$1.28, then the mean of the two spread limits ($1.245) is not within the market spread. In such a case, $1.28 is selected as the spread level that is closest to the mean and within the market spread. In an exemplary embodiment, the spread level at which Arb and Antiarb cross can be determined in any other suitable manner as long as the spread level is within the market spread and within the range of spread limits indicated in the pair trade requests.
Once the spread level is determined, the method proceeds to Step 303 in which pair crossing network 5 calculates prices to cross at that are within the current markets for ABC stock and XYZ stock and that meet the calculated spread level. In the case where the calculated spread level is $1.28, the cross will occur at a price of $70.08 for ABC stock and $124.1043 for XYZ stock. Finally, the method proceeds to Step 304 in which pair crossing network 5 performs the cross between Arb and Antiarb.
Once a pair trade request is filled (or partially filled), the transaction details are reported to portfolio manager 9 and made available to the client operating client access device 7 .
In the previous example, pair crossing network 5 crosses orders in which both Arb and Antiarb desire to trade the same pair of securities in the same ratio. In an exemplary embodiment, pair crossing network 5 executes a cross between two pair trade requests that are not perfectly matched.
For example, assume that pair crossing network 5 receives the pair trade requests as shown in Table 4. Note that these two pair trade requests are imperfectly matched because each trade request uses a different ratio between ABC and XYZ stock.
Also, assume the market in ABC and XYZ stocks at the time the pair trade requests are received by pair crossing network 5 is as described in Table 5 below.
Referindo-se agora à FIG. 4 , there is shown a flowchart illustrating a process by which pair crossing network 5 fills these imperfectly matched order. First, in Step 401 , pair crossing network 5 determines whether Arb's buy security equals Antiarb's sell security and whether Arb's sell security equals Antiarb's buy security. If both conditions are not met, then a cross between the two orders cannot occur. If the two conditions are met, then in Step 402 it is determined whether Arb's buy ratio equals Antiarb's sell ratio and whether Arb's sell ratio equals Antiarb's buy ratio. If these ratios are the same, then pair crossing network 5 proceeds to cross the two orders as described in the example above. Note that for a cross to occur at this stage does not require the ratios themselves to match but rather that the ratios of the ratios match (for e. g., a ratio of 2:3 matches a ratio of 0.667:1).
If, however, the two ratios are not equal (as in this case where Arb's sell ratio does not equal Antiarb's buy ratio), then in Step 403 pair crossing network determines whether there is an overlap between Arb's and Antiarb's spread limit that also falls within the bid/ask market for ABC and XYZ stock. To make such a determination, pair crossing network 5 calculates whether there are market prices for both ABC and XYZ stock that satisfy the following inequalities:
Where L 1 is Arb's spread limit of $1.19 credit, L 2 is Antiarb's spread limit of $4.40 debit, RatioA is Arb's buy ratio of 1:1, RatioB is Arb's sell ratio of 1:0.575, RatioC is Antiarb's sell ratio of 1:1 and RatioD is Antiarb's buy ratio of 1:0.6.
Referindo-se agora à FIG. 5 , there is shown a graph 51 that depicts market prices for ABC and XYZ stock that meet the spread limits of Arb and Antiarb. In graph 51 , the x-axis represents the prices for XYZ stock while the y-axis represents the prices for ABC stock. Graph 51 includes a shaded area 53 that is the universe of market prices for ABC and XYZ stock that could satisfy the spread trade involving those stocks. Also included in graph 53 is a spread limit line L 1 (inequality (1), above) that represents the spread limit associated with Arb and a spread limit line L 2 (inequality (2), above) that represents the spread limit associated with Antiarb. Thus, the solution set of market prices that satisfies inequalities (1) and (2) is the portion of dark shared area 53 that falls between spread limit line L 1 and spread limit line L 2 . In this example, a cross at a share price for ABC of $70.14 and a share price of $124.15 for XYZ stock meets the investor's spread limits and falls within the market prices for ABC and XYZ stock.
If it is determined that no share prices for both ABC and XYZ stock satisfy Arb's and Antiarb's spread limits, then no cross can occur. If such share prices do exist, then in Step 404 , it is determined which of the investors desires to transact in fewer shares of ABC stock and a mismatch in share amounts caused by the differing ratios is determined. In our example, Antiarb desires to sell fewer ABC shares than Arb desires to buy (30,000 vs. 50,000). Then, in Step 405 , pair crossing network 5 determines the number of XYZ shares that can be crossed between Arb and Antiarb based on the maximum amount of ABC shares that can be crossed (30,000 in this example). Based on the Antiarb ABC order quantity of 30,000 shares, the maximum number of XYZ shares that Arb will cross with Antiarb is:
30 , 000 * Arb XYZ Ratio / Arb ABC Ratio = 30 , 000 * 0.575 / 1 = 17 , 300 ( 17 , 250 rounded to an even lotsize ) .
While the maximum quantity of XYZ shares that Arb will cross is 17,300, Antiarb's trade request indicates a desire to cross 18,000 shares. To overcome this imbalance, in Step 406 , pair crossing network 5 is in communications with external markets 13 for determining whether the excess 700 XYZ shares needed to satisfy Antiarb's trade request can be transacted for in external markets 13 . In an exemplary embodiment, pair crossing network 5 makes this determination by issuing a query to pair trading engine 3 as to whether 700 shares of XYZ stock can be bought in external markets 13 . Because, as indicated in Table 5, 3,000 shares of XYZ stock are offered at $124.15, pair trading engine 3 responds to pair crossing network 5 that the 700 shares needed to balance the cross between Arb and Antiarb are available from external markets 13 at $124.15.
Next, in Step 407 , pair crossing network calculates the cross prices that are necessary such that Arb and Antiarb achieve their respective spread limits while also incorporating the excess 700 shares of XYZ stock that must be purchased from external markets 13 at $124.15 to satisfy Antiarb's trade request. An example of such cross prices that meet these criteria is a price of $70.14 for ABC stock and a price of $124.15 for XYZ stock.
Once the cross prices are calculated, in Step 408 , pair crossing network 5 crosses 30,000 shares of ABC stock and 17,300 shares of XYZ stock between Arb and Antiarb and also buys 700 shares of XYZ stock at $124.15 in external markets 13 on behalf of Antiarb. Thus, both Arb and Antiarb's pair trade requests are satisfied.
Alternatively, the entire 18,000 shares of XYZ stock may be crossed thereby fully satisfying Antiarb's trade request. In such a case, the ratio mismatch is addressed by Arb purchasing an additional 1200 (700/0.575 rounded to a lotsize) shares of ABC stock from external market 13 or from firm inventory 11 .
Once the trade is completed, the details of the transaction are provided to portfolio manager 9 to report the transaction details to the investors.
In an exemplary embodiment, a pair order (or portion thereof) may be filled against an internal inventory 11 of trade requests maintained by the financial institution operating system 1 . For example, in the previous example in which an excess of 700 shares of XYZ stock needs to be purchased in order for a match (i. e., cross) between Arb and Antiarb's trade requests to occur, instead of determining whether the 700 shares are available in external markets 3 , pair crossing network 5 examines firm inventory 11 to determine whether the shares are available at the required price. Likewise, in cases where pair trading engine 3 desires to execute a pair trade based on orders to be sent to external markets 13 , pair trading engine 3 may first determine whether the order can be filled, in whole or in part, using trade requests pending in firm inventory 11 . Generally, the advantages of filling an order using pending trade requests in firm inventory 11 is that execution is faster, transaction costs are lower and leg risk is minimized.
In another exemplary embodiment, a client's pair trade request may also include a minimum number of spreads that can be traded in pair crossing network 5 . Also, pair crossing network 5 may be designed to require a minimum share amount for a cross to occur. A minimum number of spreads that can be traded may be provided in order to reduce the distractions and booking costs associated with numerous smaller trades that may exceed the benefits of a de minimis fill.
In another exemplary embodiment, portfolio manager 9 publishes the “inside cross market” for any pair that a client has selected for crossing in pair crossing network 5 . In still another exemplary embodiment, the client has the option for each pair trade selected for crossing in pair crossing network 5 to designate that the order should be reflected in the published inside cross market. This inside cross market consists of the tightest spread bid and offer (and corresponding bid size and offer size) from all client pair orders pending in pair crossing network 5 . In this way, a client can assess the likelihood and timing of a pair trade request being filled by pair crossing network 5 . Also, by publishing the client's spread interest, others seeking liquidity can trade at the client's level.
In an exemplary embodiment, the client can designate each pair order designated for pair trading engine 3 and/or pair crossing network 5 for “Broker Negotiation.” If “Broker Negotiation” is designated, the client's broker-dealer sales representative is notified of the client's spread order thereby prompting the broker-dealer to solicit a complementary, agency order from another client. The client may also designate each pair order for “Broker Facilitation” in which case the client allows the broker-dealer to act principally to fill the client's order.
In summary, the advantages to a client of using pair trading engine 3 is that pair trading engine 3 allows the client to trade a spread order while limiting leg risk or the risk of missing a targeted spread level. This is accomplished by breaking the total order into tranches of sizes proportionate to the market, subject to user minimums and maximums, that can be traded in external markets 13 or against firm inventory 11 . Orders executed via pair trading engine 3 , however, are typically of a lower traded volume because trading is constrained to the liquidity available in the market. In contrast, trades executed via pair crossing network 5 are not constrained by market liquidity and do not have to be tranched to minimize leg risk. In particular, the benefits of filling a pair trade request via pair crossing network 5 are as follows:
Elimination of Leg Risk. Pair crossing network 5 potentially provides a deeper well of liquidity because the trades are brokered, as a spread, directly between spread investors via a central clearing facility. Moreover, the introduction and use of a pair trading facility eliminates the ‘leg’ risk described above without a sacrifice of liquidity. Large Transactions Only. Certain large investors may prefer to use pair crossing network 5 rather than pair trading engine 3 to avoid having a trade request broken up into numerous small executions. For example, sudden, brief moves in one of the two stocks included in the pair trade request may cause pair trading engine 3 to issue numerous small executions to fill the request. While a small investor may welcome capturing these small opportunities, a large investor may find such small executions to be more of a nuisance than a service. Price Setting versus Price Taking. Large investors seeking liquidity may prefer to ‘set’ their price via the pair crossing network 5 . Also, other spread investors looking for liquidity can use pair crossing network 5 to monitor and trade with the large investor at the large investor's level. While client orders directed to pair trading engine 3 can designate a spread limit, such orders are essentially “price-takers”—as the market reaches the desired level, the orders are executed. Moreover, the pair trading engine tranching mechanism creates relatively small orders, allowing institutional flows to move the individual stocks. As a result, the small, tranched orders generated by pair trading engine 3 can become ‘overpowered’ by single-name institutional flows. In addition, orders designated solely for pair trading engine 3 , and not for pair crossing network 5 , are not published to a central quote facility (such as by portfolio manager 9 ) thereby preventing other spread traders from knowing the size and limit of a pair trading engine order. Illiquid Stocks vs Liquid Stocks. Spreads that include one or two illiquid stocks are difficult to fill using pair trading engine 3 alone. Because illiquid stocks often demonstrate small bid and ask sizes and wide bid-ask spreads, pair trading engine 3 will typically only issue market orders having small quantities (subject to user minimums and maximums) that presents the client with greater leg risk from mid-trade changes in the bid-ask prices. In contrast, orders routed to price crossing network 5 are not confined by liquidity in the market place thereby allowing large crosses between spread traders in illiquid spreads.
Accordingly, a system and method for trading pair securities is provided in which the client receives the benefits of having a pair order filled by either pair trading engine 3 , pair crossing network 5 or a combination of both.
A number of embodiments of the present invention have been described. Nevertheless, it will be understood that various modifications may be made without departing from the spirit and scope of the invention. Based on the above description, it will be obvious to one of ordinary skill to implement the system and methods of the present invention in one or more computer programs that are executable on a programmable system including at least one programmable processor coupled to receive data and instructions from, and to transmit data and instructions to, a data storage system, at least one input device, and at least one output device. Each computer program may be implemented in a high-level procedural or object-oriented programming language, or in assembly or machine language if desired; and in any case, the language may be a compiled or interpreted language. Suitable processors include, by way of example, both general and special purpose microprocessors. Furthermore, alternate embodiments of the invention that implement the system in hardware, firmware or a combination of both hardware and software, as well as distributing modules and/or data in a different fashion will be apparent to those skilled in the art and are also within the scope of the invention. In addition, it will be obvious to one of ordinary skill to use a conventional database management system such as, by way of non-limiting example, Sybase, Oracle and DB2, as a platform for implementing the present invention. Also, network access devices can comprise a personal computer executing an operating system such as Microsoft Windows™, Unix™, or Apple Mac OS™, as well as software applications, such as a JAVA program or a web browser. Access devices can also be a terminal device, a palm-type computer, mobile WEB access device or other device that can adhere to a point-to-point or network communication protocol such as the Internet protocol. Computers and network access devices can include a processor, RAM and/or ROM memory, a display capability, an input device and hard disk or other relatively permanent storage. Accordingly, other embodiments are within the scope of the following claims.
It will thus be seen that the objects set forth above, among those made apparent from the preceding description, are efficiently attained and, since certain changes may be made in carrying out the above process, in a described product, and in the construction set forth without departing from the spirit and scope of the invention, it is intended that all matter contained in the above description shown in the accompanying drawing shall be interpreted as illustrative and not in a limiting sense.
It is also to be understood that the following claims are intended to cover all of the generic and specific features of the invention herein described, and all statements of the scope of the invention, which, as a matter of language, might be said to fall therebetween.