PCT
`INTERNATIONAL APPLICATION PUBLISHED UNDEF
`
`WORLD INTELLECI'UAL PROP:
`·
`International B
`
`(51) International Patent Classification 6 :
`G06F 17/60
`
`Al
`
`(11) II
`
`&\
`
`1111111111111111~1 ~~~~~I~~ 11111111 ~111111111111111111
`
`WO
`
`9605563A1
`
`(43) International Publication Date:
`
`22 February 1996 (22.02.96)
`
`(21) International Application Number:
`
`PCTIIB95/00839
`
`(22) International Filing Date:
`
`17 August 1995 (17.08.95)
`
`(30) Priority Data:
`9416673.3
`08/475,499
`
`17 August 1994 (17.08.94)
`7 June 1995 (07.06.95)
`
`GB
`us
`
`(71) Applicant: REUTERS LIMITED [GB/GB]; 85 Fleet Street,
`London EC4P 4AJ (GB).
`
`(72) Inventors: SILVERMANN, David, L.; 16 Cannen Lane,
`Saint James, NY 11780 (US). DONNER, William, L.; 29
`Ridgecroft Road, Bronxville, NY 10708 (US). ORDISH,
`Christopher; Reuters America, Inc., 88 Parkway Drive
`South, Hauppauge, NY 11788 (US).
`
`(74) Agent: MAURY, Richard, Philip; Marks & Clerk, 57-60
`Lincoln's Inn Fields, London WC2A 3LS (GB).
`
`(81) Designated States: AM, AT, AU, BB, BG, BR, BY, CA, CH,
`CN, CZ, DE, DK, EE, ES, Fl, GB, GE, HU, IS, JP, KE,
`KG, KP, KR, KZ, LK, LR, LT, LU, LV, MD, MG, MK,
`MN, MW, MX, NO, NZ, PL, PT, RO, RU, SD, SE, SG, Sl,
`SK, TJ, TM, TT, UA, UG, UZ, VN, European patent (AT,
`BE, CH, DE, DK, ES, FR, GB, GR, IE, IT, LU, MC, NL,
`PT, SE), OAPI patent (BF, BJ, CF, CG, Cl, CM, GA, GN,
`ML, MR, NE, SN, TD, TG), ARIPO patent (KE, MW, SD,
`SZ, UG).
`
`Published
`With international search report.
`Before the expiration of the time limit for amending the
`claims and to be republished in the event of the receipt of
`amendments.
`
`(54) Title: NEGOTIATED MATCHING SYSTEM
`
`(57) Abstract
`
`A negotiated matching
`system
`includes a plurality
`of
`remote
`terminals
`associated with
`respective
`potential
`counterparties,
`a
`communications network for
`permitting
`communication
`between the remote terminals,
`and
`a matching
`station.
`Each user enters
`trading
`information
`and
`ranking
`or
`information
`into
`his
`her remote
`terminal.
`The
`matching station
`then uses
`the
`trading
`and
`ranking
`information from each user
`to
`identify
`transactions
`between counterparties
`that
`are mutually acceptable based
`on the ranking information,
`thereby matching potential
`counterparties to a transaction.
`Once a match occurs,
`the
`potential
`counterparties
`transmit negotiating messages
`to negotiate some or all terms
`of the
`transaction.
`Thus,
`the
`negotiated matching
`system first matches potential
`412
`counterparties
`who
`are
`acceptable to each other based on trading and ranking information, and then enables the two counterparties to negotiate and finalize the
`terms of a transaction.
`
`5.63
`
`5 CALL IN BNfC X
`
`1
`
`410
`
`

`
`FOR THE PURPOSES OF INFORMATION ONLY
`
`Codes used to identify States party to the Per on the front pages of pamphlets publishing international
`applications under the PCf.
`
`AT
`AU
`BB
`BE
`BF
`BG
`BJ
`BR
`BY
`CA
`CF
`CG
`CH
`CI
`CM
`CN
`cs
`cz
`DE
`DK
`ES
`Fl
`FR
`GA
`
`Austtia
`Australia
`Barbados
`Belgium
`BurtiDa Fuo
`Bulgaria
`Bellin
`Bnzil
`Belarus
`CIIUida
`Ceutnl African Republic
`Congo
`Switzerland
`COte d'Ivoire
`Cameroon
`China
`Czccboslovakia
`Czech Republic
`Germany
`Demnark
`Spain
`Finland
`Prance
`Gabon
`
`GB
`GE
`GN
`GR
`HU
`lE
`IT
`JP
`KE
`KG
`KP
`
`KR
`KZ
`Ll
`LK
`LU
`LV
`MC
`MD
`MG
`ML
`MN
`
`United Kingdom
`Gecqia
`Guinea
`Greece
`Hunguy
`Ire lind
`Italy
`Japan
`Kenya
`Kyrgystan
`Democratic People '1 Republic
`of Korea
`Republic of Korea
`Kazakhstan
`Liccble111tein
`Sri Lanka
`Luxembourg
`Lalvia
`Mouaco
`Republic of Moldova
`Madagucar
`Mali
`Mongolia
`
`MR
`MW
`NE
`NL
`NO
`NZ
`PL
`PT
`RO
`RU
`SD
`SE
`SI
`SK
`SN
`TD
`TG
`TJ
`TI
`UA
`us
`uz
`VN
`
`Mauritania
`Malawi
`Niger
`Netherlands
`Norway
`New Zealand
`Poland
`Ponugal
`Romania
`Russian Federation
`Sudan
`Sweden
`Slovenia
`Slovakia
`Senegal
`Chad
`Togo
`Tajikistan
`Triuidad and Tobago
`Ukraine
`United States of America
`Uzbekistan
`VietNam
`
`

`
`W096/05563
`
`PCTIIB95/00839
`
`NEGOTIATED MATCHING SYSTEM
`
`A portion of the disclosure of this patent document contains material which is subject
`
`to copyright protection. The copyright owner has no objection to the facsimile reproduction
`
`by any one of the patent disclosure, as it appears in the Patent and Trademark Office patent
`
`files or records, but otherwise reserves all copyright rights whatsoever.
`
`FIELD OF THE INVENTION
`
`The present invention relates to a negotiated matching system that identifies potential
`
`counterparties to a transaction using criteria input by each user of the system and then
`
`enables communication between the counterparties so that the parties may negotiate the final
`
`terms and/or details of the transaction. The present invention further relates to a method of
`
`identifying potential counterparties to a transaction according to filtering criteria input by
`
`system users and then enabling communication between the counterparties so that they may
`
`negotiate the terms and/or details of the transaction.
`
`BACKGROUND OF THE INVENTION
`
`Automated dealing systems (e.g., for trading currencies, commodities, and the like)
`
`are increasingly replacing the conventional manner of dealing using a broker as an
`
`intermediary. When a broker is used to complete a transaction, anonymity of the
`
`counterparties is preserved either throughout the deal or until just prior to the completion of
`
`- 1 -
`
`

`
`W096/05563
`
`PCTIIB95/00839
`
`a transaction depending on the conventions of the particular market. The brokers are familiar
`
`with the trading practices of their clients and therefore help to prevent traders who do not
`
`want to trade with one another for whatever reason from dealing with one another. Removal
`
`of such human safeguards has lead to the development of automated checks and validations
`
`in the automated dealing systems.
`
`For example, some known automated trading systems allow traders to enter credit
`
`information which is used to check the suitability of counterparties before the deal is
`
`completed and before the identity of the parties is revealed. One such system is described
`
`in U.S. Patent No. 5,136,501 wherein, prior to the completion of a transaction, a credit
`
`check is performed to insure that each party is willing to extend sufficient credit to its
`
`potential counterparty. Another known trading system is described in European Patent
`
`Application 92303437.5 in which the system automatically matches offers and bids using
`
`credit ranking information entered by each trader.
`
`These and other known trading systems have a number of drawbacks. First, these
`
`systems are only amenable to highly specified trading instruments in which all criteria on
`
`which a decision to trade is based are readily quantifiable and standardized in the industry
`
`and the system. For example, decisions to trade some types of highly specified financial
`
`instruments are based solely on the price of the instrument and the quantity available. These
`
`easily-defined criteria are easy to incorporate into an automated trading system. However,
`
`the known automated trading systems are not capable of accommodating types of financial
`
`instruments that are traded using more subjective, less-quantifiable criteria. For example,
`
`known automated trading systems do not provide traders with the opportunity to filter out
`
`potential deals with other traders who may be unacceptable trading partners on the basis of
`
`subjective criteria other than the party's credit, for example, geographic location or political
`
`- 2 -
`
`

`
`W096/05563
`
`PCTIIB95/00839
`
`or other competitive criteria. Hitherto, this has only been possible through the agency of a
`
`broker who may take into account his client's other types of less quantifiable, subjective
`
`criteria concerning parties his clients are willing to deal with while maintaining the
`
`anonymity of his clients. Therefore, there is a need for an electronic trading system which
`
`accommodates subjective, less-quantifiable trading criteria.
`
`Second, the marketplace may create new, non-standardized types of trading
`
`instruments to fit its specific needs. The known electronic trading systems are not capable
`
`of accommodating these non-standardized trading instruments because the instrument
`
`specifications in these systems are pre-defined based on standardized trading instruments.
`
`Therefore,
`
`there is a need for an automated trading system which is capable of
`
`accommodating non-standardized trading instruments.
`
`Third, in the known automated trading systems, once a trader has entered a bid or
`
`offer, the trader no longer has the discretion of negotiating the entered terms of the bid or
`
`offer. The system automatically executes trades when compatible offers and/or bids are
`
`found. In some systems, a trader may enter a "soft" offer or bid, wherein the trader retains
`
`the discretion to either execute or not execute the trade. However, the terms of such a soft
`
`offer or bid defme the objective criteria that must be satisfied to create a firm offer or bid.
`
`The known systems provide no means by which a trader can input a mere "expression of
`
`interest" in a particular transaction wherein the trader need not provide predefined objective
`
`criteria which would make the expression of interest firm.
`
`In other words, the known trading systems are designed to execute frrm transactions
`
`when the system locates a bid and offer that match. based on detailed specific information
`
`concerning the terms of the bid and offer input by the users. These systems do not provide
`
`a means by which two parties who are potentially interested in dealing with one another may
`
`- 3 -
`
`

`
`W096/05563
`
`PCT/IB95/00839
`
`be introduced to one another based on preliminary information input into the system, and
`
`then allowed to negotiate the terms of a transaction using a communication link.
`
`Fourth, the known automated trading systems cannot accommodate credit-complex
`
`trading instruments. Credit-complex trading instruments are those for which the calculation
`
`of a trading party's risk or exposure at a given time is based on multiple elements and is
`
`therefore too complex to integrate into a large-scale trading system. Generally, in order to
`
`calculate its exposure, a bank must evaluate several types of risk, for example, credit risk,
`
`settlement risk, and liquidity risk. Credit risk is the effect of the transaction on the bank's
`
`overall books if the counterparty goes bankrupt before the transaction is completed. Credit
`
`risk is evaluated as the replacement value of the transaction assuming that the counterparty
`
`is unable to compete the transaction. Settlement risk is the risk that a bank will complete its
`
`half of the transaction and the counterparty will be unable to complete its half of the
`
`transaction, for example, because the counterparty goes bankrupt prior to settlement.
`
`Liquidity risk is the risk that the holder of an instrument will not be able to sell that
`
`instrument at a reasonable price when the holder wishes to liquidate the position.
`
`The determination of credit risk is fairly straightforward for short-term transactions
`
`such as spot transactions which are settled as soon as the market allows because the risk that
`
`a counterparty will go bankrupt during the short period of time prior to settlement is very
`
`small. Therefore, it is likely that both parties will complete the settlement of the transaction.
`
`However, the complexity of calculating credit risk increases significantly as the
`
`settlement period increases. For example, in forward markets, e.g., the forward foreign
`
`exchange and forward rate agreements markets, often transactions do not have a final
`
`settlement for several months, a year, or longer. Clearly, there is a greater risk that a
`
`counterparty will go bankrupt within this longer period of time prior to settlement. As a
`
`- 4 -
`
`

`
`W096/05563
`
`PCT/IB95/00839
`
`result, banks' methods of calculating their long term exposure, including both settlement and
`
`credit risk, become increasingly complex and take into account multiple factors.
`
`Therefore, banks and other financial institutions use complex formulae and methods
`
`to calculate their potential exposure for each transaction based on a highly complex
`
`evaluation of the time decay of the value of money and risk, the institution's total exposure,
`
`and numerous other factors. Each fmancial institution has its own systems and procedures
`
`for evaluating its exposure. These credit and risk management procedures are highly
`
`confidential and not standardized by any means. As a result, to successfully accommodate
`
`these procedures into a single automated trading system, either the financial institutions must
`
`standardize their procedures or the implementers of the system must customize their system
`
`to accommodate each different institution. Neither of these options is a practicable solution
`
`to this problem because banks are not likely to standardize their credit and risk management
`
`processes and a customized trading system would be economically infeasible. Also, banks
`
`and other trading institutions are extremely protective of information regarding their credit
`
`and risk management procedures and may be unwilling to give out this information to third(cid:173)
`
`party programmers who are designing a system or to put this information on line where other
`
`parties may be able to access it.
`
`SUMMARY OF THE PRESENT INVENTION
`
`In view of the above described problems associated with known automated trading
`
`systems, it is an object of the present invention to provide a negotiated matching system
`
`which introduces potential counterparties to a transaction based on a first, firm set of
`
`transaction parameters input into the system by each .party, and then enables communication
`
`between the potential counterparties to negotiate a second, negotiated set of transaction
`
`parameters. A transaction is only completed when both sets of transaction parameters are
`
`- 5 -
`
`

`
`W096/05563
`
`PCT/IB95/00839
`
`agreed upon by all parties to the transaction. The sets of transaction parameters may vary
`
`for each market. Also, in some markets, traders may negotiate all transaction parameters.
`
`A further object of the present invention is to provide a system which enables users
`
`to trade financial and other types of instruments based on objective criteria and subjective
`
`criteri:t which are not standardized and/or easily quantifiable.
`
`It is a further objective of the present invention to provide a negotiated trading system
`
`which enables users to enter expressions of interest with respect to a type of transaction,
`
`wherein the user need not provide defined or objective criteria necessary to complete the
`
`transaction.
`
`It is another objective of the present invention to provide a negotiated trading system
`
`which identifies parties who are potentially interested in transacting business and place these
`
`parties in communication with one another.
`
`It is another object of the present invention to provide a negotiated trading system
`
`which accommodates the numerous complex and non-standardized exposure evaluation
`
`procedures of various fmancial institutions within a single automated trading system while
`
`preserving the confidentiality of these procedures.
`
`Yet another object of the present invention is to provide a matching system which
`
`automatically matches users making offers (offerors) or bids (bidders) with potential
`
`counterparties who are interested in the type of offer/bid being made by the offeror/bidder,
`
`wherein the parties are mu~ly acceptable trading partners for the particular category of
`
`transaction sought by the offeror, and wherein the identity of the parties to the transaction
`
`is not revealed until just before or at the time a deal has been struck.
`
`The aforementioned objects, as well as other objects, of the present invention are
`
`achieved by providing a negotiated matching system with a flltering feature that filters the
`
`- 6 -
`
`

`
`W096/05563
`
`PCf/IB95/00839
`
`potential transactions to be displayed to a trader based on ranking and other transaction
`
`information input by the trader and potential counterparties. The ranking information
`
`provides an indication of how each user ranks other users in terms of acceptability as a
`
`counterparty to one or more types of transactions. Thus, counterparties who do not each
`
`achieve a minimum predetermined ranking score set by the other are filtered out. As a
`
`result, potential transactions between unacceptable counterparties are not displayed to the
`
`user, and unacceptable trading counterparties are not matched by the system. The other
`
`transaction information includes trading parameters, such as price and quantity of an
`
`instrument to be traded.
`
`The negotiated matching system according to the present invention includes a plurality
`
`of remote terminals associated with respective potential counterparties and a communications
`
`network for permitting communication between the remote terminals and a matching
`
`computer and between the remote terminals themselves. Each user enters a first set of
`
`transaction parameters including ranking and other information into his or her remote
`
`terminal. The matching computer uses the first set of transaction parameters (ranking data,
`
`price data, size data and other parameters or attributes) from each user to identify potential
`
`transactions with potential counterparties.
`
`If potential transactions are identified, the
`
`respective parties are notified so that they may begin negotiation of a second set of
`
`transaction parameters. The second set of transaction parameters which may be negotiated
`
`by the parties to the potential transaction identifies by the system may consist of 1) some or
`
`all of the parameters in the first set of transaction parameters, 2) some parameters from the
`
`first set and other parameters not included in the first. set, or 3) only parameters not included
`
`in the first set. Both the first and second set of transaction parameters must match before
`
`the system will execute a transaction.
`
`- 7 -
`
`

`
`W096/05563
`
`PCTIIB95/00839
`
`The system according to the present invention also distributes the bid and offer
`
`information entered into the system to the users of the system. Prior to their display to the
`
`users, the bids and offers may be filtered using the ranking data entered by the users, thereby
`
`limiting the bids and offers displayed to individual users. When a user sees a desirable bid
`
`or offer on his or her screen, the user may "hit" the bid or "take" the offer, thereby entering
`
`an offer corresponding to the bid or a bid corresponding to the offer. The matching
`
`computer then uses the first set of transaction parameters (e.g., ranking data, price data, size
`
`data and other parameters or attributes) entered by each party to the potential transaction to
`
`determine whether the potential counterparties are compatible.
`
`If so, the potential
`
`counterparties are notified so that they may begin to negotiate the second set of transaction
`
`parameters as described above. No transactions are executed unless the parties agree on both
`
`sets of parameters for the transaction.
`
`Thus, the negotiated matching system according to the present invention only permits
`
`dealing between parties who are mutually acceptable counterparties based on the first set of
`
`transaction parameters (e.g., ranking, price, size and other "firm" parameters) and does not
`
`automatically execute transactions until the parties have agreed on all terms of the
`
`transaction.
`
`A benefit of the negotiated matching system according to the present invention is that
`
`the complex and confidential credit evaluation and risk management procedures of various
`
`financial institutions are taken off line completely and left up to each individual party. This
`
`greatly simplifies the system needed to accommodate numerous financial institutions, does
`
`not require standardization of institution financial practices, and allows the institutions to
`
`keep their credit practices confidential.
`
`Furthermore, the negotiated matching system according to the present invention
`
`- 8 -
`
`

`
`W096/05563
`
`PCTIIB95/00839
`
`provides a framework for matching potential counterparties without necessarily automatically
`
`executing transactions. The discretion to execute a transaction thus may remain with the
`
`traders themselves and is not surrendered to the system.
`
`One embodiment of the negotiated matching system according to the present invention
`
`includes a matching computer; a plurality of remote terminals corresponding to a plurality
`
`of users, wherein the remote terminals enable the users to enter transaction data into the
`
`system; and a communications network for transmitting negotiating messages between two
`
`or more of the remote terminals in response to control signals from the matching computer.
`
`The matching computer is coupled to the plurality of remote terminals by the communications
`
`network. The matching computer matches potential counterparties to a transaction based on
`
`the transaction data entered by the users and generates the control signals when a potential
`
`match is identified.
`
`A second embodiment of the present invention includes a matching computer; a
`
`plurality of remote terminals corresponding to a plurality of users, wherein the remote
`
`terminals enable the users to enter transaction data and ranking data into the system; and a
`
`communications network for transmitting negotiating messages between two or more of the
`
`remote terminals in response to control signals from the matching computer. The matching
`
`computer is coupled to the plurality of remote terminals by the communications network.
`
`The matching computer matches potential counterparties to a transaction by comparing the
`
`transaction data entered by the users and filtering the transaction data using the ranking data.
`
`The matching computer generates the control signals when a potential match is identified.
`
`A method of identifying potential counterparties to a transaction according to the
`
`present invention includes the steps of receiving ranking data and transaction data from a
`
`plurality of remote terminals corresponding to a plurality of potential counterparties to a type
`
`- 9-
`
`

`
`W096/05563
`
`PCTIIB95/00839
`
`of transaction; filtering the transaction data using the ranking data to identify for each user
`
`transactions with potential counterparties who are mutually acceptable based on the ranking
`
`data, thereby matching potential counterparties to a transaction; and transmitting negotiating
`
`messages between the potential counterparties, thereby enabling the potential counterparties
`
`to negotiate terms of the transaction.
`
`Various additional advantages and features of novelty which characterize the invention
`
`are further pointed out in the claims that follow. However, for a better understanding of the
`
`invention and its advantages, reference should be made to the accompanying drawings and
`
`descriptive matter which illustrate and describe preferred embodiments of the invention.
`
`BRIEF DESCRIPTION OF THE DRAWINGS
`
`FIG. 1 provides a diagram of one configuration of the negotiated matching system
`
`according to the present invention.
`
`FIG. 2 provides a flow chart of the operation of the negotiated matching system
`
`according to the present invention.
`
`FIGS. 3-7 provide illustrations of sample screens displayed on the remote terminal
`
`displays of two parties to a transaction at different stages of the transaction.
`
`DETAILED DESCRIPTION
`
`The negotiated matching system according to the present invention will now be
`
`described with reference to the accompanying drawings.
`
`With reference to FIG. 1 , one possible configuration of the negotiated matching
`
`system 100 according to the present invention includes a matching computer 11 and remote
`
`terminals 101 and 102. The system contemplates a. plurality of remote terminals whereby
`
`a large number of users have simultaneous access to the negotiated matching system;
`
`however, for description purposes, two remote terminals 101 and 102 and optional remote
`
`- 10-
`
`

`
`W096/05563
`
`PCT/IB95/00839
`
`terminals 103 and 104 are shown in FIG. l.
`
`The matching computer 11 is connected to the remote terminals 101 and 102 through
`
`a communication network 1. Nodes 17 and 19 may also be inserted into the communication
`
`network 1 between matching computer 11 and remote terminals 101 and 102. These nodes
`
`17 and 19 may be intelligent nodes which, for example, perform filterin6 operations or
`
`passive nodes (repeater stations) which merely transmit information from the matching
`
`computer 11 to the remote terminals 101 and 102. Connectors 21 and 23 maybe used to
`
`connect additional remote terminals(~. 103 and 104) and/or additional nodes(~, 25 and
`
`27) to the network.
`
`Remote terminals 101 and 102 also are connected via communication network 1.
`
`Remote terminals 101 and 102 may communicate with each other via network 1 once the
`
`filtering and matching process is completed by the matching computer 11. This operation
`
`will be described in further detail below with reference to FIGS. 3-6.
`
`The communication network 1 may also include switching centers (not shown) which
`
`are configured as a conventional packet switching network so that, if the most direct route
`
`between remote terminals 101 and 102 becomes inoperable due to a malfunction in a part of
`
`the system, the routing can be varied to enable communication between the terminals 101 and
`
`102. It will be appreciated that, in many situations, terminals 101 and 102 will be distributed
`
`around the globe.
`
`The negotiated matching system according to the present invention may be realized
`
`using a number of different network configurations. For example, where nodes 17 and 19
`
`are passive (repeaters), matching computer 11 performs all matching and filter operations for
`
`the system as will be described below. Where nodes 17 and 19 are intelligent nodes, these
`
`nodes may perform some filtering functions, while matching and additional filtering takes
`
`- 11 -
`
`

`
`W096/05563
`
`PCTIIB95/00839
`
`place in the matching computer 11. Filtering may also be performed by remote terminals
`
`101 and 102. Particularly in a worldwide system, the use of intelligent nodes will prevent
`
`overloading of the computer or network and result in more efficient operation of the
`
`negotiated matching system.
`
`FIG. 2. provides a flow chart which illu!:trates the overall operation of the negotiated
`
`matching system according to the present invention shown in FIG. 1 (with intelligent nodes
`
`such as 17 and 19). The functions of the matching computer 11 as described below may be
`
`performed using a configuration of hardware components, software components, or both.
`
`The system may accommodate a plurality of markets (e.g., foreign exchange, interest rate
`
`swaps, etc.). However, for purposes of simplicity, the operation of the system in a single
`
`market will be described below. The steps of operation are as follows.
`
`INITIAL OPERATION
`
`201 - Each user enters ranking information (as described below with
`
`reference to FIG. 1).
`
`202 -
`
`ranking information from each user is uploaded to the matching
`
`computer 11 and stored.
`
`203 -
`
`the ranking information is then distributed by the matching
`
`computer 11 to intelligent nodes 17, 19, etc. where it is stored
`
`(this step is optional depending on the configuration of the
`
`system - if there are no intelligent nodes, storage occurs only
`
`in the matching computer 11).
`
`204-
`
`the users enters bids and offers including firm (non-negotiable)
`
`and soft (negotiable) parameters pertaining to the bids and
`
`offers ~. price, quantity, expiration terms, acceptable credit
`
`- 12 -
`
`

`
`W096/05563
`
`PCTIIB95/00839
`
`ranking) into the system using their remote terminals. Traders
`
`may enter bids and offers into the system at any time.
`
`205 -
`
`the matching computer 11 uploads and stores entered
`
`bids/offers with their corresponding parameters.
`
`MATCHING OPERATION
`
`206 -
`
`the matching computer attempts to match bids and offers
`
`entered by the users based on the parameters of the entered
`
`bids and offers and the ranking information entered by the
`
`users. The bids and offers entered by the users may also be
`
`matched with standing orders or resting orders already in the
`
`system.
`
`220 -
`
`if a match between a bid and an offer is identified, the
`
`matching computer 11 then freezes (places on hold) the bid and
`
`offer so that it is not displayed to other users (in a different
`
`embodiment of the system, the offer or bid is not held such that
`
`other users may select it simultaneously and attempt to
`
`negotiate a better deal with the offeror or bidder).
`
`221 - once the offer and bid are frozen, the system automatically
`
`signals counterparties to enable electronic communication
`
`between the two parties to the potential transaction.
`
`222- once the traders have agreed to the transaction (e.g., each party
`
`has performed its credit and risk management procedures in
`
`which any objective and/or subjective criteria may be evaluated
`
`and is able to complete the transaction) and an agreement has
`
`- 13 -
`
`

`
`W096/05563
`
`PCTIIB95/00839
`
`been reached as to all firm and soft parameters of the
`
`transaction, the remote terminals of the offeror and bidder send
`
`signals to the matching computer 11 to execute the transaction
`
`and remove the offer and bid from the system.
`
`223 -
`
`(optional) trade tickets are printed for each party to confmn the
`
`transaction.
`
`224 -
`
`the transaction is recorded by the matching computer 11, and
`
`(optional) the price and quantity of the transaction is broadcast
`
`to the remote terminals of all traders on the system.
`
`225 -
`
`if the traders are not successful in negotiating a deal, the
`
`offeror or bidder may have the option of re-entering the offer
`
`or bid into the system.
`
`207 -
`
`if no matches are identified, the bids and offers are distributed
`
`to the users of the system as described below in step 208.
`
`DISPLAY OPERATION
`
`208 - either simultaneously with, before, or after trying to match the
`
`entered bids and offers described above in step 206 (depending
`
`on the desired implementation of the system), the matching
`
`computer 11 distributes the bids/offers to the intelligent nodes
`
`17, 19, etc. where they are optionally stored.
`
`209 - each user selects a display mode (no filtering, unilateral
`
`filtering, or bilateral filtering or a combination of these).
`
`210-
`
`if the bilateral display mode is selected, the node corresponding
`
`to the user's remote terminal or the remote terminal itself
`
`- 14-
`
`

`
`W096/05563
`
`PCTIIB95/00839
`
`filters all offers and bids in the market using the ranking
`
`information from each user to determine whether parties are
`
`acceptable to one another. The remote terminal then displays
`
`all offers/bids in the market which are mutually acceptable to
`
`the user and a potenticl counterparty.
`
`211 -
`
`if the unilateral filtering display mode is selected, the user may
`
`select whether filtering is performed using the user's ranking
`
`information or potential counterparties' ranking information.
`
`212 - once the user has made this selection, the node corresponding
`
`to the user's remote terminal or the remote terminal itself
`
`filters the offers and bids in the market based on ranking
`
`information as requested by the user and displays all acceptable
`
`offers/bids in the market.
`
`213 -
`
`if the "no filtering" display mode is selected, the node
`
`corresponding to the user's remote terminal transmits for
`
`display all offers/bids in the market.
`
`214 - once the filtered or unflltered bids/offers are displayed, the
`
`user may "hit" or "take" one of the displayed bids or offers.
`
`215 -
`
`the hit and take messages are uploaded to the matching
`
`computer 11.
`
`216-
`
`if the taken offer or hit bid is available to the trader based on
`
`the ranking information and the bid/offer. parameters entered by
`
`both the trader and the potential counterparty, the matching
`
`computer 11 freezes the offer or bid so that it is not displayed
`
`- 15 -
`
`

`
`W096/05563
`
`PCTIIB95/00839
`
`to other users as described in step 220 above, and the steps
`
`following step 220 are performed as described above.
`
`217 -
`
`if the transaction is not available to the user, for example,
`
`based on the ranking information entered by both the user and
`
`the potential counterparty or the timing of the hit or take, the
`
`user is informed that the transaction is not available.
`
`Unlike bids and offers entered into the