United States Patent [191
`Silverman et a1.
`
`[11]
`[45]
`
`Patent Number:
`Date of Patent:
`
`5,077,665
`Dec. 31, 1991
`
`[54] DISTRIBUTED MATCHING SYSTEM
`[75] Inventors: David L. Silverman, Nesconset;
`'
`Alfred H. Scholldorf, Port Jefferson
`Station; Norman Keller, Mt. Sinai, all
`of N.Y.
`[73] Assignee: Reuters Limited, England
`[21] Appl. No.: 357,036
`[22] Filed:
`May 25, 1989
`
`[51] Int. Cl.5 ......................... ..; ................ .. G06F 15/20
`[52] US. Cl. .............. ..
`364/408; 364/401
`[58] Field of Search ...................... .. 364/408, 401, 514
`
`[56]
`
`References Cited
`1
`U.S. PATENT DOCUMENTS
`
`3,573,747 4/1971 Adams et a1. .................. .. 340/ 172.5
`3,581,072 5/1971 Nymeyer ....... ,.
`235/152
`4,412,287 10/1983 Braddock, III ..
`364/408
`4,674,044 6/1987 Kalmus et a1.
`364/408
`4,677,552 6/1987 Sibley, Jr.
`364/408
`4,745,559 5/1988 Willis et a1. ..
`364/514
`4,750,135 6/1988 Boilen et a1. .
`364/514
`4,868,866 9/1989 Williams, Jr. ....................... .. 380/49
`
`FOREIGN PATENT DOCUMENTS
`
`1489571 10/1977 United Kingdom .............. .. 364/408
`1489573 10/ 1977 United Kingdom .............. .. 364/408
`Primary Examiner—Jerry Smith
`Assistant Examiner—-Russell E. Cass
`Attorney, Agent, or Firm-Bryan, Cave, McPheeters &
`McRoberts
`[571
`A matching system for trading instruments is provided
`in which bids are automatically matched against offers
`
`ABSTRACT
`
`.
`
`for given trading instruments for automatically provid
`ing matching transactions in order to complete trades
`for the given trading instruments in which controllable
`subsets (110, 112) of a distributable system trading book
`(118) may be selectively provided to trading keystations
`(24) in the matching system from the host computer (20)
`or central system for dynamically controllably masking
`the available trading market. The system comprises the
`host computer (20) for maintaining a host book data
`base (118) comprising all of the active bids and offers in
`the system by trading instrument, a transaction originat
`ing keystation (240) at a client site (26) for providing a
`bid on a given trading instrument to ‘the system for
`providing a potential matching transaction, a counter
`party keystation (24b) for providing an offer on the
`given trading instrument involved in the potential
`matching transaction, and a network (22) for intercon
`necting the host computer (20), the transaction originat
`ing keystation (24a) and the counterparty keystation
`(24b) in the system for enabling data communication
`therebetween. Both the transaction originating keysta
`tion (240) and the counterparty keystation (24b) each
`have an associated local data base keystation book (110,
`112) comprising a subset of the host book (118). The
`content of each of the keystation books (110, 112) has an
`associated display depth range which is dynamically
`controllable by the host computer (20) and is dynami
`cally updatable by transaction update broadcast mes
`sages (132) received from the host computer (20)
`through the network (22) which is preferably transpar
`em to the transactions communicated.
`
`57 Claims, 13 Drawing Sheets
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`US. Patent
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`Dec. 31, 1991
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`Sheet 1 0f 13
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`US. Patent
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`Dec. 31, 1991
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`US. Patent
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`Dec. 31, 1991
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`5,077,665
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`US. Patent
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`Dec. 31, 1991
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`US. Patent
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`Dec. 31, 1991
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`US. Patent
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`US. Patent
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`Dec. 31, 1991
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`US. Patent
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`US. Patent
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`Dec. 31, 1991
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`Sheet 13 of 13
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`

`

`1
`
`DISTRIBUTED MATCHING SYSTEM
`
`CROSS-REFERENCE TO RELATED
`APPLICATIONS
`This application is related to the commonly owned
`co-pending U.S. Patent Application entitled “Distrib
`uted Matching System Method", contemporaneously
`?led herewith and naming the applicants herein as joint
`inventors thereof, the contents of which is specifically
`incorporated by reference herein in its entirety.
`
`10
`
`TECHNICAL FIELD
`The present invention relates to matching systems for
`effectuating trades of trading instruments through auto
`matic matching in which buyers and sellers who are
`willing to trade with one another based on speci?ed
`criteria may automatically trade when matching events
`occur satisfying these criteria, and more particularly to
`such matching systems in which the book of bids and
`offers may be distributed under control of the central
`system or host computer, to the participating keysta
`tions or client sites in the system.
`
`25
`
`35
`
`5,077,665
`2
`employed between the keystations in the system and the
`central system to update the local entry order data bases
`and broadcast messages are employed to update the
`keystation book which is a restricted subset of the host
`or central system book. Moreover, none of these prior
`art system employ summary books at the local keysta
`tions as subsets of the host or central system book.
`In the system of the present invention, as opposed to
`the prior art known to applicants, the central system
`maintains a data base consisting of all of the trading
`instruments available for trade, credit information, and
`the bids and offers that are present throughout the sys
`tem, while the client sites or keystations maintain copies
`of only the best bids and offers and use those to generate
`a display. Thus, the client sites have some restricted
`subset of the total depth of the system book located at
`the central data base. By transmitting only subsets of the
`total system book from the host, the amount of network
`overhead that is required is significantly reduced, which
`reduction is further enhanced by the use of only sum
`mary information in the keystation books. Moreover,
`this enables the central data base maintaining a full set of
`information for every entry including identification of
`the parties which identi?cation is not to be provided for
`the subset books at the keystations in an anonymous
`trading system. The only time that the keystation is
`made aware of the parties involved in the transaction is
`after the transaction has been completed. Thus, in the
`system of the present invention, the host may enforce a
`structure on the client site data bases which is the maxi
`mum depth of displayable queue or display depth for a
`particular trading instrument. By a single parameter
`change at the host or central system, the view of the
`trading instrument throughout the entire matching sys
`tem “world” can be effectively changed. For example.
`if the host system sets the display depth equal to one,
`then none ‘of the keystations would be able to look
`further into the book. If desired, this procedure can be
`dynamically varied from the host so that at given times
`or given days different aspects of the trading environ
`ment can be displayed. Although, dynamic control of
`the content of a local receiver data base from a transmit
`ted data base in an information retrieval communication
`network has been previously employed by applicants
`assignee such as disclosed in US. Pat. Nos. 4,745,559
`and 4,750,135, these systems are different from the type
`of system control employed in the system of the present
`invention in which restricted subsets of the host book
`are maintained as summary books at the keystation local
`data bases. Thus, the system of the present invention for
`providing a distributed matching system overcomes the
`disadvantages of the prior art.
`'
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`BACKGROUND ART
`Information retrieval systems for ?nancial informa
`tion, such as stock market type of information and
`money market information, normally employ a transfer
`of data in a high-performance, real-time information
`retrieval network in which update rates, retrieval rates
`and subscriber and/or user population are generally
`very high. An example of such a system is REUTERS
`DEALING SERVICE which is used in the foreign
`exchange or money market. Such systems, while pro
`viding rapid video conversation capability, are not
`anonymous systems nor do they provide for automated
`anonymous trading such as is possible in a matching
`system. Of course, conversational dealing systems have
`their place in the market and serve particular needs
`where appropriate. However, anonymous matching
`systems are also often desired and, by their very nature,
`do not normally employ a conversation capability since
`the parties to the transactions are unknown until the
`transaction has been completed. Examples of satisfac
`tory prior art video conversational systems for use in
`connection with trading of financial information are
`disclosed in commonly owned US. Pat. Nos.
`4,53l.l84:4,525,779 and. 4,404,551, by way of example.
`Prior art examples of matching systems used in connec
`tion with the trading of trading instruments are dis
`closed in US. Pat. No. 4,412,287, which discloses as an
`automated stock exchange in which a computer
`matches buy and sell orders for a variety of stocks; US
`Pat. No. 3,573,747, which discloses an anonymous trad
`ing system for selling fungible properties between sub
`scribers to the system; US. Pat. No. 3,581.072, which
`discloses the use of a special purpose digital computer
`for matching orders and establishing market prices in an
`auction market for fungible goods; and US. Pat. No.
`4.674.044. which discloses an automated securities trad
`ing system. However, none of these prior art matching
`systems implements or suggests the use of a broadcast
`capability for messages from the host computer or cen
`tral system which is employed to update a trading book
`of bids and offers locally stored at the keystations to
`provide restricted subsets of the host book at these
`keystations. In Addition. no prior art matching systems
`are known to applicants in which directed messages are
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`DISCLOSURE OF THE INVENTION
`A matching system for trading instruments is pro
`vided in which bids are automatically matched against
`offers for given trading instruments for automatically
`providing matching transactions in order to complete
`trades for the given trading instruments in which con
`trollable subsets of a distributable system trading book
`may be selectively provided to trading keystations in
`the matching system from the host computer or central
`system for controllably masking the available trading
`market. The system comprises the host computer for
`maintaining a host' book data base comprising all ofthe
`active bids and offers in the system by trading instru
`ment, a transaction originating keystation at a client site
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`happened to the offer or bid at that particular keystation
`made in the connection with the matching transaction.
`Thus, by employing the distributed matching system of
`the present invention, controllable subsets of a distribut
`able system trading book may be selectively provided to
`the various trading keystations in the matching system
`from the host or central system in order to controllably
`mask the available trading market and efficiently trans
`mit only the required matching information to those
`keystations which require it.
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`for providing a bid on a given trading instrument to the
`system for providing a potential matching transaction, a
`counterparty keystation for providing an offer on the
`given trading instrument involved in the potential
`matching transaction, and a network for interconnect
`ing the host computer, the transaction originating key
`station and the counterparty keystation in the system
`for enabling data communication therebetween. Both
`the transaction originating keystation and the counter
`party keystation, which of course can comprise more
`than one counterparty for a given transaction, for the
`potential matching transaction each have an associated
`local data base keystation book comprising a subset of
`the host book. The content of each of the keystation
`books has an associated display depth range which in
`controllable by the host computer and is updatable by
`transaction update broadcast messages received from
`the host computer through the network. The network is
`preferably transparent to the transactions communi
`cated via the network. The transaction originating key
`stations and the counterparty keystation or keystations
`comprise means responsive to the received transaction
`update broadcast messages for updating the associated
`keystation books and further comprise means for pro
`viding directed messages to the host computer corre
`25
`sponding to the bid and the offer, respectively. The
`directed messages are processed and used to update the
`host book. The host computer comprises means for
`conditionally providing the transaction broadcast up
`date messages to the keystations in the system in re
`sponse to the presence of an update condition. The
`update condition comprises updating of the host book
`and the received bid or offer having a relative value
`compared with other bids or offers within the host book
`,which is within the keystation book display depth
`range of relative values. Preferably the host computer
`processes the matching transaction for a given trading
`instrument in time order entry to the matching system.
`The subset keystations books preferably comprise accu
`mulated summaries of corresponding bids and offers in
`the host book, with the summaries comprising an accu
`mulation of common price bids and an accumulation of
`common price offers. Preferably, the bids and offers
`comprise logical data. Tokens are used in the system for
`transmission of the data with respect to users and other
`information. The keystation book, as was previously
`mentioned, comprises displayable data having a de?ned -
`keystation book display depth range, such as the best
`bid or offer, the next best bid or offer, and so forth, and
`bids and offers which fall outside that display depth
`range are not displayed. Thus, the keystation books
`each comprise a restricted subset of the total depth of
`the host book with respect to the best bids and offers
`present in the host book data base. These bids and offers
`contained in the keystation books are anonymous prior
`to the completion to the matching transaction. In this
`regard, preferably a display depth of one for the keysta
`tion books would prevent looking into the host book at
`the keystation. In the system of the present invention,
`the broadcast messages from the host or central system
`are broadcast to all of the keystations in the matching
`system and are used to update the keystation books
`whereas the directed messages which are sent from the
`central system or host are directed back only to the
`keystations involved in the actual matching transaction.
`These directed messages are used to update the local
`entry data base or order book at the local keystations
`involved in the transaction so as to indicate what has
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`BRIEF DESCRIPTION OF DRAWINGS
`FIG. 1 is an overall system functional block diagram
`of the distributed matching system of the present inven
`tion;
`FIG. 2 is a functional block diagram of the system of
`FIG. 1 illustrating the ?ow of information in connec
`tion with the entry of a bid and the entry of an offer in
`the distributed matching system of FIG. 1;
`FIG. 3 is a functional block diagram similar to FIG.
`2 of the flow of information in the distributed matching
`system of the present invention in connection with a hit
`bid or trade;
`FIG. 4 is an illustrative diagram of a logical model of
`a book market, pre-posting, at the host or central system
`of the present invention and illustrates the central sys
`tem book in accordance with the present invention;
`FIG. 5 is an illustrative diagram similar to FIG. 4
`illustrating a typical keystation book as a subset of the
`central system book illustrated in FIG. 4;
`-
`FIG. 6 is a functional block diagram illustrating the
`flow of information in the system of the present inven
`tion in connection with a typical matching transaction;
`FIGS. 7-12 are illustrative diagrams of a typical IXM
`update broadcast message structure in accordance with
`the system of the present invention;
`FIG. 13 is an illustrative diagram similar to FIG. 4,
`illustrating a book market entry position, at market,
`based on the example of FIG. 4;
`FIG. 14 is an illustrative diagram similar to FIG. 4 of
`book market entry position, with the creation of a new
`sub-book based on the book illustration of FIG. 4;
`FIG. 15 is an illustration similar to FIG. 4 of an auc
`tion market entry position, market equal, based on the
`book of FIG. 4;
`FIG. 16 is an illustrative diagram similar to FIG. 15
`of the auction market entry position, with the market
`bettered, based on the book of FIG. 4;
`FIG. 17 is an illustration of a logical model of the
`book market, similar to FIG. 4, after posting; and
`FIG. 18 is an illustrative diagram similar to FIG. 4 of
`the logical model of the book market of FIG. 4 after
`trade.
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`BEST MODE FOR CARRYING OUT THE
`INVENTION
`Referring now to to drawings in detail and initially to
`FIG. 1 thereof, the system of the present invention is a
`distributed anonymous matching system for use in trad
`ing various trading instruments. such as different for
`eign exchange currencies. In the system of the present
`invention as described herein, the trading is effectuated
`through anonymous matching as opposed to through
`the conversation video system described in US Pat.
`Nos. 4,531,184; 4,525,779; and 4,404,551, commonly
`owned by applicants‘ assignee herein. Thus. the distrib
`uted matching system of the present invention may be
`thought of as a computerized exchange in which its
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`keystation, 240 by way of example, at that client site 260
`central role is to identify a buyer and a seller who are
`which initiated the transaction message whereas the
`willing to trade with one another based on speci?ed
`broadcast message 34 goes to all client sites 26a. 26b and
`criteria, such as price, quantity and credit. When such a
`all of the various keystations associated at those client
`matching event occurs, preferably the buyer and seller
`sites 26a, 26b. By way of example, in FIG. 1 a typical
`are informed of the trade and sufficient information is
`client site 260 is shown as having keystations 24a. 24b,
`then provided to them to complete the physical clearing
`240 through to 24 n with the number of keystations
`of the transaction. In order to support this central func
`merely being limited by the capacity of the system and
`tion, the matching system requires various support
`the desired processing time. With respect to the distri
`functions one of which is preferably the maintenance of
`bution of the functionality in the system of the present
`summary market information on the participant's work
`invention, the communication network 22 preferably
`station or keystation displays at the various client sites.
`does not really play a part in that it is transparent to
`Preferably in the system of the present invention, at all
`transactional information. By this what is meant is that
`times the system will display the best inside price for
`when the transactional information leaves the client site
`every instrument traded on the system. The best inside
`26a, for example, it could be, if desired, encrypted or
`price is preferably de?ned to be the highest value bid
`garbled in a way that the only other entity which could
`and the lowest value offer in the system. Preferably the
`understand it would be the central system 20 and that
`prices are displayed together with the quantity bid or
`would be irrelevant to the function of the network 22
`offered at the speci?ed price so that the trader at the
`keystation can observe the market activity.
`since the network does not look at the messages, does
`not process the messages, and merely transfers these
`By observing the market activity, the trader can de
`messages to the appropriate parts of the system, such as
`cide whether to enter a bid, or enter an offer into the '
`to the central system 20. In this regard, the network 22
`market in an effort to complete a matching transaction.
`is functioning similar to a paired cable in that it is a
`Preferably, the anonymous matching system of the pres
`conduit to pass the information back and forth. Of
`ent invention essentially maintains a book of bids and
`course, the network 22 has various other communica
`offers in the central system 20 or host computer. A user
`tion functions which, however, for purposes of under
`or keystation at a client site, such as client site 260 or
`26b illustrated in FIG. 1, by way of example, interacts
`standing the present invention are unnecessary to go
`into. Suffice it to say that preferably, the communica
`with the book by submitting bid, offer, hit, or take trans
`tion network 22 uses a protocol which can be termed
`actions. The order entry function is preferably conven
`tionally achieved through data entry using a conven
`hierarchal fan-out in which one node transmit to multi
`ple nodes which in turn transmits to multiple other
`tional keyboard, pointing device such as a mouse or any
`nodes. Thus, network 22 helps implement broadcast
`other conventional data entry tool. The central system
`capabilities integrated with a message switching net
`20 validates the transaction request, processes the bid,
`work to achieve full tolerance and broadcast distribu
`offer, hit or take according to the rules of the market,
`tion. It should be noted, when a match occurs, the cen
`and attempts to ?nd matches between this new entry
`tral system 20 will preferably send directed messages or
`and the other bids and offers posted in the system book.
`responses to all of those parties in the system that were
`If a match is found, then the trade is automatically exe’
`involved in the match, so that, in some instances, two,
`cuted, the participants to the trade are informed, all
`three or more client site 26 maybe involved in receiving
`databases and trader screens are updated as to the quan
`the directed message. However, this still differs from
`tities traded and the quantities remaining and, if desired,
`40
`the broadcast message which is sent to all client sites
`a clearing agency may be informed as to the details of
`irrespective of their involvement in a particular match.
`the trade so that payments and exchanges may be com
`Referring now to FIG. 2, this ?gure illustrates a typi
`pleted. If, on the other hand, a match cannot be found,
`cal data flow in accordance with the system of the
`then the system preferably either disposes of the entry
`present invention for entry of a bid or entry of an offer,
`for hit or take or keeps the entry for bid or offer for later
`with the network 22 being omitted since, as was previ
`processing. Preferably in all cases transactions are pro
`ously mentioned, it is transparent to transactional infor
`cessed to completion according to certain rules and the
`various client sites 26a, 26b preferably receive real-time
`mation. First discussing the enter bid event in accor
`dance with the system of the present invention, keysta
`updates of the new status of the trading instruments.
`Thus, as shown and preferred in FIG. 1, the client site
`tion 1 or 240, submits a bid transaction to the central
`system 20. The directed message or directed response
`systems 260 and 26b only two of which are shown by
`32 which it receives back from the central system or
`way of example in FIG. 1, submit transactions, such as
`represented by reference numeral 30, to the central
`host 20 is termed a bid acknowledgment or BID-ACK.
`This acknowledgment is a command acknowledgment
`system 20 via the communication network 22. As will
`which is preferably followed by an entry position mes
`be explained in greater detail hereinafter with reference
`sage and is as was previously mentioned, is directed
`'to FIG. 6, the submission of a transaction 30 from a
`directly back to the keystation 240. In addition, as
`client site 260 or 26b to the central system 20 will pref
`shown and preferred in FIG. 2, a bid update message is
`erably result in one or more messages, represented by
`broadcast by the central station 20 to all keystations in
`reference numeral 32, going directly back as a directed
`the system. such as represented by reference numeral
`message to the client site 260 in this example, which
`34a in FlG.2. This broadcast message 340 preferably
`initiated the transaction message. Another effect of the
`transaction message 30 being sent to the central system
`occurs if this new bid 320 was the new best bid in the
`system, or was an additional quantity being bid at the
`20 is that for certain sorts of transactions, a broadcast
`message 34 is generated by the central system 20 which
`best price in the system. Thus, if this new bid 32a is at
`the highest price or better or higher, then it will result
`is then delivered to all client sites 26a. 26b attached to
`in a bid update broadcast message 340 going out
`the central system 20. Thus, the directed response or the
`throughout the system. In addition. as also shown by
`directed message 32 only goes back to the particular
`way of example in FIG. 2, if it is desired to disseminate
`client site 260 and, more particularly, the particular
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`represents the primary quantity of the trading instru
`an external ticker 60, then the ticker information 60 will
`ment. As further shown and preferred in FIGS. 4 and 5.
`also be provided of the best bid or best offer. Preferably,
`on the bid side the highest absolute value is at the top of
`the same procedure is followed with respect to entry of
`the book and the lowest absolute value is at the bottom
`an offer with the messages, in this instance, being identi
`of the book, whereas on the offer side the worst relative
`?ed as offer, given reference numeral 51, offer acknowl
`offer value is at the top of the book and the best relative
`edgment or OFFER-ACK, given reference numeral
`offer v