United States Patent [19J
`Silverman et al.
`
`[11] Patent Number:
`(45) Date of Patent:
`
`5,077,665
`Dec. 31, 1991
`
`[54} DISTRIBUTED MATCHING SYSTEM
`Inventors: David L. Silverman, Nesconset;
`[75]
`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. CJ.S .............................................. G06F 15/ 20
`[52) u.s. Cl . ..................................... 364/408; 364/ 401
`[58] Field of Search ........................ 364/408, 401, 514
`[56)
`References Cited
`U.S. PATENT DOCUMENTS
`3.573,747 4/ 1971 Adams et al. .................... 340/ 172.5
`3,581,072 5/ 1971 Nymeyer ............................ 235/ 152
`4,4.J2,287 10/1983 Braddock, Ill ..................... 364/ 408
`4,674,044 6/ 1987 Kalmus et al ....................... 364/ 408
`4,677,552 6/ 1987 Sibley, Jr ............................ 364/408
`4,745,559 5/ 1988 Willis et al. ......................... 364/ 514
`4,750,135 6/ 1988 Boilen et al. ........................ 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 &
`McRobens
`(57]
`ABSTRACT
`A matching system for trading instruments is provided
`in which bids are automatically matched against offers
`
`for given trading instruments for automatically provid(cid:173)
`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(cid:173)
`ing keystation (24a) 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(cid:173)
`party keystation (24b) for providing an offer on the
`given trading instrument involved in the potential
`matching transaction, and a network (22) for intercon(cid:173)
`necting the host computer (20), the transaction originat(cid:173)
`ing keystation (24a) and the counterparty keystation
`(24b) in the system for enabling data communication
`therebetween. Both the transac tion originating keysta(cid:173)
`tion (24a) 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(cid:173)
`cally updatable by transaction update broadcast mes(cid:173)
`sages (132) received from the host computer (20)
`through the network (22) which is preferably transpar(cid:173)
`ent to the transactions communicated.
`
`57 Claims, 13 Drawing Sheets
`
`20
`
`CENTRAL
`
`SYSTeM
`
`32
`OIA'£CT£/)
`AI£SSA6£
`
`26b
`CLIENT
`SITE
`
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`
`32
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`
`24b
`
`XACT
`.30
`
`22
`
`XACT
`iRA!YSACTION)
`MESSAGE J
`30
`
`(
`
`TDA 1008
`CBM of U.S. Pat. No. 6,766,304
`
`0001
`
`

`
`U.S. Patent
`
`Dec. 31, 1991
`
`Sheet 1 of 13
`
`5,077,665
`
`FIG. I
`
`C£NTI<AL
`
`SYST£M
`
`20
`
`XACT
`JO
`
`32
`DIRECTED BROAf)CAST
`AIESSA6E 34
`
`26b
`
`22
`
`XACT
`TRANSACTION)
`M£SSIJG£ J
`30
`
`(
`
`32
`
`1is~ · "(isJ
`24b
`
`34
`BROADCAST
`
`CLIENT
`SIT£
`
`26~
`
`KEY STAn
`(KS)
`
`24o.
`
`0002
`
`

`
`U.S. Patent
`
`Dec. 31, 1991
`
`Sheet 2 of 13
`
`5,077,665
`
`~
`~
`~
`~
`~ ~
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`
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`ts
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`
`FIG. 3
`0.4TAFLON 2: 1/IT BID /TRAO£
`
`TRADE
`BEST BID.
`
`CeNTRAL
`
`TIC!<ER
`
`'60
`
`CLEAR/IVG /NFO
`
`ClEARING
`
`69
`
`TRADE
`T/CkET
`62
`
`64
`
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`MATCH
`
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`
`ITRAOE TICKET
`
`TRADE UPDATE
`
`0004
`
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`
`24n
`
`...
`01
`0
`-....l
`...
`-....l
`0'\
`0'\
`Ul
`
`

`
`U.S. Patent
`
`Dec. 31, 1991
`
`Sheet 4 of 13
`
`5,077,665
`
`FIG. 4
`CENTRAL STATION BtJ()K
`
`NIGHeST
`
`8/LJ Sl£)£
`OFFER SID£
`T!Ml 0/f/)£1? 01' Of'FERS
`TIME 0tfi)£R 0~ 8/f)S
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`VALUE. SPREAD
`
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`:3
`~ 8£ST 138.86 138.86 1.38.86
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`BEST OFF£R VALIJ[: 739.19
`BE.ST BID VALI.JE: 13~.86
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`
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`
`Nore:MIJRE (}UANT1l'1£S /.11/VE B£EN
`.
`·
`1/iNPtfED. ALL E111TRIES 111/V£ #0
`OPTIONS .SPEC/f:'IED (1/NOtiALIFIED).
`
`0005
`
`

`
`U.S. Patent
`
`Dec. 31, 1991
`
`Sheet 5 of 13
`
`5,077,665
`
`FIG. 5
`KEYST47/0N 800k
`
`BID S/LJE
`
`h"/6NEST
`
`(DISPLAY
`DEPTH
`OF 3)
`
`OFFER SI DE
`. WORST
`p39.70l
`~-92
`
`(lJISPLAY
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`OF 3)
`~
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`BEST
`10.0
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`
`DB
`
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`
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`
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`
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`
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`
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`f. PROCESS D/RECT~O tiiSGS.
`TO MA/N'T A/A/ OROER D/3 f#
`2. BUILD DIRECTED MSG.(cid:173)
`ACK (OPTIONAL)
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`MSG. 70 MAINTAIN
`BOOK DB 110 (OPT/t!JAI'A/)
`
`cs - -
`f. RECEIVE XACT FROM KS-A
`2. 5£/1/LJ CMO-ACK TO KS-A
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`CS BOOK DB 118
`4. BUILD PIRcCTED AISG. TtJ kS·A
`5 . Bt.n.D l)fRECTED M5G 70
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`7. Rt=CE/VE LJtR£CTED USG .. -
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`3 . BUILIJ XACT llNIJ SEND TO CS.
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`6. PROCeSS BR/JAOCAST
`MS6S. TO .MAINTAIN BtJ(JI(
`D81t2.
`
`

`
`U·.S. Patent
`
`Dec. 31, 1991
`
`Sheet 7 of 13
`
`5,077,665
`
`FIG. 7
`
`FIELD BYTE FIELD IVAM£
`SIZE TYPE
`0
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`PROTOCOL TYPE
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`7
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`5
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`
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`7
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`13 25 RFRSTAT£
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`14 26 71?11/JE IV~H!IIP !i1J4NTITY ()4 t¥1/A!ITITY 7Yf>t:
`!5 30 BLOCK LIST SIZE
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`
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`f//G# &t/OT£
`
`S IZE TYPE
`/)UOTc TYP6
`()8
`
`0008
`
`

`
`U.S. Patent
`
`Dec. 31, 1991
`
`Sheet 8 of 13
`
`5,077,665
`
`FIG. 10
`
`LOlli BLtJCk
`FI£Ll) BYTe FIELD NAME SIZ£ TYPE
`0
`1
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`LOW (}tJOTE
`
`FIG. II
`TRADE &LtJCK
`FIELD BYT£ FI£LD NAME SIZE TYPE
`0
`08
`1
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`TRAO£ GtJIJTE
`TRAPc t1UAN TITY 04 t}UANTI 7 Y T YP£
`2
`8
`
`0PtR4 r!ON BLOCK FIG. 12
`
`FIELD BYTe FIELD NAM€
`TYPE
`SIZ€.
`f
`OPERATION COb£ 01 ENVM
`0
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`2
`Of
`BYTE'
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`4
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`15 QIJANTI TY ATTtfl$/ll ()/ ENt/M
`G
`
`0009
`
`

`
`U.S. Patent
`
`Dec. 31, 1991
`
`Sheet 9 of 13
`
`5,077,665
`
`FIG. 13
`
`1/ME t:/RLJER
`r/~r OF tCJF.FER S
`r / r....J -------LAST
`
`WtJ~ST
`
`~
`~~
`..... ~ "
`~~
`~ ~ VJWI----~. f73Wl
`~ L.a:£1
`L2:£.J
`!. NEW OFFER WTERS A!IJRKET.
`BEST
`J/4LI/E IS E0t/4L TO TIIAT
`/),rAN ENT.RY TNAT IS
`/ILREAOY PtJSIT/ON'C:£>.
`
`//RST
`
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`tJF OR.OERS LAST
`
`Wt?RST 1'~.05 I
`
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`
`5.0
`139.70
`2.0
`
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`120
`
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`6.0
`
`/3970
`5.0
`
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`
`5.0
`
`2. NEW t)f",r£R IS POSITiONED
`IN TilE S//8·8001( WJTII Til£
`SA.M£ VALUE. IT IS
`f'tJSITIO#EO /IFT.:R TilE
`£)<!STING £NTRY
`
`0010
`
`

`
`U.S. Patent
`
`Dec. 31, 1991
`
`Sheet 10 of 13
`
`5,077,665
`
`FIG. 14
`
`139.70
`20
`
`!39.70
`6.0
`
`!39.70
`5.0
`
`IIIEW OF,c-£R ENTERS MA~KtT.
`VAL tiE IS NOT EIJtiAL
`TO THAT tJ/' All £AITI?Y
`TIUT IS At.RE;Ifi>Y
`POSI T/ON'E L).
`
`2. ENTRY IS POSITIONED
`AT TilE TIJP tJr A NEW
`S/18- BOOK.
`THE SI/!J • ~tJOK /J.PLAC£1)
`BETWEEN IJTIIM .511&-~
`TO PRESERYe KELATIVE
`OFI"O VALUE ORDER//1/6.
`
`0011
`
`

`
`U.S. Patent
`
`Dec. 31, 1991
`
`Sheet 11 of 13
`
`5,077,665
`
`FIG. 15
`
`Rtf'ST
`1.39. 7/J
`20
`
`1:
`139.7{}
`2.0
`
`/.39.70
`/39.7t'
`6,()
`.5.0
`T/M£ O,l!?L)£'1('
`/),r tJFFE.RS
`LAST
`139.70 · /39.70 VJ.~:7o · .. ·
`.s.~ ·.· ...... ·. 5.0
`6.0
`
`0/'/"E..f /S POSITION££)
`/IS LAST ENT/CY JN TIME
`ORO£R IN TilE SUB-B()OK.
`ASSt/111.€ N()RMAL
`MATCIII#G L061C.
`
`FIG. /6
`
`F/RSr.
`139.70
`/39.7t?
`6./J
`2-0
`
`/.39.70
`,5.()
`
`OR/6/NAL OF,F£/?.S
`CA!t'C~LLEL> AN..D
`I?EM'OYED FtfOM 8001(.
`
`0012
`
`

`
`U.S. Patent
`
`Dec. 31, 1991
`
`Sheet 12 of 13
`
`5,077,665
`
`FIG. 17
`
`77NE t/A'LJER
`~~
`(),e" ~/OS
`. LAST --------'-Fitur FIRST-
`~
`
`TIM£ OROER
`()/" 0/'FE/<S
`
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`
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`
`~~~----~~~~
`139.7()
`/39.7()
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`1'.0
`6.0
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`
`BEST
`
`!3P.I9
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`
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`6.()
`
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`
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`/()
`5.0
`
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`4.0
`
`WtJ~ST
`
`138.38
`.30
`
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`f/.0
`
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`13£ST I!JIL) YALt/c: IJ~fJ
`
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`
`BE.ST &'LJ W/T/1 THE rtJ/LtJMA/G
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`
`2. S/ACE TilE 8£ST 8-'L) VAL tiE AN'.O &SST tJ~~ER VALUe
`ARE /rtJI'I TilE SAM~ ie J){E,eE 15/V.O VIlLI/£ SP~EA~
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`TO 711€ M.4TC#I....VG
`;::"(l.tVCT!0/1/.
`
`0013
`
`

`
`U.S. Patent
`
`Dec. 31, 1991
`
`Sheet 13 of 13
`
`5,077,665
`
`FIG. /8
`
`BID S/L)E
`
`T/#E OR,DE:R
`LAST O/" LJIL)S
`FIRST
`
`OFF£R S/.CJE
`TIME t)RL)ER
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`WORS~
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`~~
`139.70
`1.39.70
`7.39.70
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`2.0
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`BEST ~ VALVE SPReAD
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`
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`
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`B£ST81D VALUE:13'-19
`
`3. MATOIING DISCOVeRS A TRAL:>£ ~T
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`NOTE NeW BEST 8 1l> H'#.O !3£ST tJFFEJ? VALt/£5.
`
`0014
`
`

`
`1
`
`5,077,665
`
`DISTRIBUTED MATCHfl'\G SYSTEM
`
`CROSS-REFERENCE TO RELATED
`APPLICATIONS
`This application is related to the commonly owned
`co-pending U.S. Patent Application entitled "Distrib(cid:173)
`uted Matching System Method", contemporaneously
`filed herewith and naming the applicants herein as joint(cid:173)
`inventors thereof, the contents of which is specifically
`incorporated by reference herein in its entirety.
`
`TECHNICAL FIELD
`The present invention relates to matching systems for
`effectuating trades of trading instruments through auto(cid:173)
`matic matching in which buyers and sellers who are
`willing to trade with one another based on specified
`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(cid:173)
`tions or client sites in the system.
`
`25
`
`BACKGROUND ART
`lnfonnation retrieval systems for financial informa(cid:173)
`tion, such as stock market type of information and
`money market information, normally employ a transfer
`of data in a high-performance, real-time infonnation
`retrieval network in which update rates, retrieval rates 30
`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(cid:173)
`viding rapid video conversation capability, are not 35
`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 40
`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(cid:173)
`tory prior art video conversational systems for use in 45
`connection with trading of financial information are
`disclosed
`in commonly owned U.S. Pat. Nos.
`4,531.184:4.525,779 and· 4,404,551, by way of example.
`Prior art examples of matching systems used in connec(cid:173)
`tion with the trading of trading instruments are dis- SO
`closed in U.S. Pat. No. 4,412,287, which discloses as an
`automated stock exchange
`in which a computer
`matches buy and sell orders for a variety of stocks; U.S.
`Pat. No. 3,573,747, which discloses an anonymous trad(cid:173)
`ing system for selling fungible properties between sub- 55
`scribers to the system: U.S. Pat. No. 3,581.072, which
`discloses the use of a special purpose digital computer
`for matching orders and establishing maFket prices in an
`auction market for fungible goods; and U.S. Pat. No.
`4.674.044. which discloses an automated securities trad- 60
`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(cid:173)
`tral system which is employed to update a trading book
`of bids and offers locally stored at the keystations to 65
`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
`
`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
`5 or central system book. Moreover, none of these prior
`art system employ summary books at the local keysta(cid:173)
`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
`10 maintains a data base consisting of all of ti1e trading
`instruments available for trade, credit information, and
`the bids and offers that are present throughout the sys(cid:173)
`tem, while the client sites or keystations maintain copies
`of only the best bids and offers and use those to generate
`15 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 frcm the host, the amount of network
`overhead that is required is significantly reduced, which
`20 reduction is further enhanced by the use of only sum(cid:173)
`mary information in the keystation books. Moreover,
`this enables the central data base maintaining a full set of
`infonnation for every entry including identification of
`the parties which identification is not to be provided for
`the subset books at the keystations in an anonymous
`trading system. 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(cid:173)
`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(cid:173)
`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(cid:173)
`ment can be displayed. Although, dynamic control of
`the content of a local receiver data base from a transmit(cid:173)
`ted data base in an information retrieval communication
`network has been previously employed by applicants
`assignee such as disclosed in U.S. Pat. Nos. 4, 745,559
`and 4,750,135, these systems are 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.
`
`DISCLOSURE OF THE INVENTION
`A matching system for trading instruments is pro(cid:173)
`vided in which bids are automatically matched against
`offers for given trading instruments for automatically
`pro";'iding matching transactions in order to complete
`trades for the given trading instruments in which con(cid:173)
`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 hosi book data base comprising all of the
`active bids and offers in the system by trading instru(cid:173)
`ment, a transaction originating keystation at a client site
`
`0015
`
`

`
`5,077,665
`
`4
`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(cid:173)
`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(cid:173)
`mit only the required matching information to those
`keystations which require it.
`
`BRIEF DESCRIPTION OF DRAWINGS
`FIG. 1 is an overall system functional block diagram
`of the distributed matching system of the present inven(cid:173)
`tion;
`FIG. 2 is a functional block diagram of the system of
`FIG. 1 illustrating the flow of information in connec(cid:173)
`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(cid:173)
`tem book in accordance with the present invention;
`FIG. 5 is an illusirative 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(cid:173)
`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(cid:173)
`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.
`
`3
`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- 5
`ing the host computer, the transaction originating key(cid:173)
`station and the counterparty keystation in the system
`for enabling data communication therebetween. Both
`the transaction originating keystation and the counter(cid:173)
`party keystation, which of course can comprise more 10
`than one counterparty for a given transaction, for the
`potential matching transaction each have an associated
`local data base keysta~ion book comprising a subset of
`the host book. The content of each of the keystation
`books has an associated display depth range which in 15
`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(cid:173)
`cated via the network. The transaction originating key- 20
`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(cid:173)
`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(cid:173)
`date messages to the keystations in the system in re- 30
`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 35
`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(cid:173)
`mulated summaries of corresponding bids and offers in 40
`the host book, with the summaries comprising an accu(cid:173)
`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 45
`information. The keystation book, as was previously
`mentioned, comprises displayable data having a defined
`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 50
`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 55
`to the completion to the matching transaction. In this
`regard, preferably a display depth of one for the keysta(cid:173)
`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 60
`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. 65
`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
`
`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(cid:173)
`ing various trading instruments. such as different for(cid:173)
`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 U.S. 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
`thoughi of as a computerized exchamge in which its
`
`0016
`
`

`
`5,077,665
`
`5
`central role is to identify a buyer and a seller who are
`willing to trade with one another based on specified
`criteria, such as price, quantity and credit. When such a
`matching event occurs, preferably the buyer and seller
`are informed of the trade and sufficient information is 5
`then provided to them to complete the physical clearing
`of the transaction. In order to support this central func(cid:173)
`tion, the matching system requires various support
`functions one of which is preferably the maintenance of
`summary market information on the participant's work- 10
`station or keystation displays at the various client sites.
`Preferably in the system of the present invention, at all
`times the system will display the best inside price for
`every instrument traded on the system. The best inside
`price is preferably defined to be the highest value bid IS
`and the lowest value offer in the system. Preferably the
`prices are displayed together with the quantity bid or
`offered at the specified price so that the trader at the
`keystation can observe the market activity.
`By observing the market activity, the trader can de- 20
`cide whether to enter a bid. or enter an offer into the
`market in an effort to complete a matching transaction.
`Prefecably, the anonymous matching system of the pres(cid:173)
`ent invention essentially maintains a book of bids and
`offers in the central system 20 or host computer. A user 25
`or keystation at a client site. such as client site 26a or
`26b illustrated in FIG. 1, by way of example, interacts
`with the book by submitting bid, offer, hit, or take trans(cid:173)
`actions. The order entry function is preferably conven(cid:173)
`tionally achieved through data entry using a conven- 30
`tional keyboard, pointing device such as a mouse or any
`other conventional data entry tool. The central system
`20 validates the transaction request, processes the bid,
`offer, hit or take according to the rules of the market,
`and attempt~ to find matches between this new entry 35
`and the other bids and offers posted in the system book.
`If a match is fo.und, then the trade is automatically exe(cid:173)
`cuted, the participants to the trade are informed, all
`databases and trader screens are updated as to the quan(cid:173)
`tities traded and the quantities remaining and, if desired, 40
`a clearing agency may be informed as to the details of
`the trade so that payments and exchanges may be com(cid:173)
`pleted. If, on the other hand, a match cannot be found ,
`then the system preferably either disposes of the entry
`for hit or take or keeps the entry for bid or offer for later 45
`processing. Preferably in all cases transactions are pro(cid:173)
`cessed to completion according to certain rules and the
`various client sites 26a, 26b preferably receive real-time
`updates of the new status of the trading instruments.
`Thus. as shown and preferred in FIG. 1, the client site SO
`systems 26a and 26b only two of which are shown by
`way of example in FIG. 1, submit transactions, such as
`represented by reference numeral 30, to the central
`system 20 via the communication network 22. As will
`be explained in greater detail hereinafter with reference 55
`to FIG. 6, the submission of a transaction 30 from a
`client site 26a or 26b to the central system 20 will pref(cid:173)
`erably result in one or more messages, represented by
`reference numeral 32, going directly back as a directed
`message to the client site 26a in this example, which 60
`initiated the transaction message. Another effect of the
`transaction message 30 being sent to the central system
`20 is that for certain sorts of transactions, a broadcast
`message 34 is generated by the central system 20 which
`is then delivered to all client sites 26a. 26b attached to 65
`the central system 20. Thus, the directed response or the
`directed message 32 only goes back to the particular
`client site 26a and. more particularly, the particular
`
`6
`keystation, 24a by way of example, at that client site 26a
`which initiated the transaction message whereas the
`broadcast message 34 goes to all client sites 26a. 26b and
`all of the various keystations associated at those client
`sites 26a. 26b. By way of example, in FIG. 1 a typical
`client site 26a is shown as having keystations 24a. 24b,
`24c through to 24 n with the number of keystations
`merely being limited by the capacity of the system and
`the desired processing time. With respect to the distri(cid:173)
`bution of the functionality in the system of the present
`invention, the communication network 22 preferably
`does not really play a part in that i't is transparent to
`transactional information. By this what is meant is that
`when the transactional information leaves the client site
`26a. for example, it could be, if desired, encrypted or
`garbled in a way that the only other entity which could
`understand it would be the central system 20 and that
`would be irrelevant to the function of the network 22
`since the network does not look at the messages, does
`not process the messages, and merely transfers these
`messages to the appropriate parts of the system, such as
`to the central system 20. In this regard, the network 22
`is functioning similar to a paired cable in that it is a
`conduit to pass the information back and forth . Of
`course, the network 22 has various other communica(cid:173)
`tion functions which, however, for purposes of under(cid:173)
`standing the present invention are unnecessary to go
`into. Suffice it to say that preferably, the communica(cid:173)
`tion network 22 uses a protocol which can be termed
`hierarchal fan-out in which one node transmit to multi(cid:173)
`ple nodes which in turn transmits to multiple other
`nodes. Thus, network 22 helps implement broadcast
`capabilities integrated with a message switching net(cid:173)
`work to achieve full tolerance and broadcast distribu(cid:173)
`tion. It should be noted, when a match occurs, the cen(cid:173)
`tral system 20 will preferably send diJj'ected messages or
`responses to all of those parties in the system that were
`involved in the match, so that, in some instances, two,
`three or more client site 26 maybe involved in receiving
`the directed message. However, this still differs from
`the broadcast message which is sent to all client sites
`irrespective of their involvement in a particular match.
`Referring now to FIG. 2, this figure illustrates a typi(cid:173)
`cal data flow in accordance with the system of the
`present invention for entry of a bid or entry of an offer,
`with the network 22 being omitted since, as was previ(cid:173)
`ously mentioned, it is transparent to transactional infor(cid:173)
`mation. First discussing the enter bid event in accor(cid:173)
`dance with the system of the present invention, keysta(cid:173)
`tion 1 or 24a, submits a bid transaction to the central
`system 20. The directed message or directed response
`32 which it receives back from the central system or
`host 20 is termed a bid acknowledgment or BID-ACK.
`This acknowl