`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
`May 25, 1989
`[22] Filed:
`
`Int. Cl.s ···························'·················· G06F 15/20
`[51)
`[52] U.S. Cl •..................................... 364/408; 364/401
`[58) Field of Search ........................ 364/408, 401, 514
`References Cited
`[56)
`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, III ..................... 364/408
`4,674,044 6/1987 Kalmus eta!. ...................... 364/408
`4,677,552 6/1987 Sibley, Jr ............................ 364/408
`4,745,559 5/1988 Willis eta!. ......................... 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 &
`McRoberts
`ABSTRACT
`[57]
`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 transaction 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
`
`SYST£M
`32
`DIRECTED
`N£SSA6E
`
`XACT
`.30
`
`22
`
`26b
`CLIENT
`.SITE
`
`XACT
`TRANSACTION)
`MESSAGE I
`30
`
`(
`
`32
`
`~ 24b
`
`8ROADCAST
`
`IBG 1003
`CBM of U.S. Patent No. 7,676,411
`
`0001
`
`
`
`U.S. Patent
`
`Dec. 31, 1991
`
`Sheet 1 of 13
`
`5,077,665
`
`FIG. I
`
`CENTRAL
`
`SYSTEM
`
`20
`
`XACT
`.30
`
`32
`DIRECTED BROA/JCIIST
`AIESSA6£ 34
`
`26b
`
`22
`
`XACT
`TRAHSIICTION)
`M£SSiiG£ )
`30
`
`(
`
`32
`
`1isJ" ·1~s1
`24b
`
`34
`BROADCAST
`
`CLIENT
`SIT£
`
`26a..
`
`KE.YSTAn
`(KS)
`
`24o.
`
`0002
`
`
`
`FIG. 2
`DATAFLOW 1: ENTER 81[), eNTER OFFER
`
`BEST BID
`BeST OFFER.
`
`TICKER
`
`CENTR.4L
`
`20
`
`6()
`
`OFFER 1./P£)/ITE
`
`~FFER-ACK
`
`246
`
`24n
`
`~ • rJ).
`•
`1-d
`~
`f""t(cid:173)
`
`(t) =
`
`f""t-
`
`t:::l
`!l
`
`1'1)
`
`~ .... ~ ....
`....
`
`\C
`\C
`
`1'1)
`
`00 =-1'1)
`.....
`N
`Q
`
`~ ....
`
`~
`
`...
`(.II
`0
`.......
`.......
`...
`0\
`0\
`(;II
`
`0003
`
`
`
`U.S. Patent
`
`Dec. 31, 1991
`
`Sheet 3 of 13
`
`5,077,665
`
`~
`
`~
`
`~
`~
`ts~ ~
`~
`~~
`K
`~~ ~ ~
`
`'t
`~
`
`~ '!J .... ~
`.;::: ~~
`~ ~
`~ ~~
`~
`
`\j
`~
`~
`~
`~
`
`0004
`
`
`
`U.S. Patent
`
`Dec. 31, 1991
`
`Sheet 4 of 13
`
`5,077,665
`
`FIG. 4
`CENTRAL STATION BOOK
`
`8/0 SIL)E
`OFFeR SID£
`TIME OHD£1? 01' OFFERS
`TIME O&>ER OF 8//)S
`LAST
`LAST
`R~ rhfS,..
`
`HIGHeST
`
`~/00
`
`~
`..J
`~
`~
`:3
`75' 7?,
`73"'\.
`~ BEST /38.86 138.86 1.38.86
`s.o
`~
`1.0
`4.0
`
`139.70
`5.0
`98
`
`139.70
`6.0
`
`139.70
`2.0
`flli61194 1
`96
`~885.90
`139. f9
`139.19
`6.0
`30
`VALUE. SPREAD
`
`Wt~ST
`LIJIVESI
`
`13B.38
`3.0
`\82.
`
`~3lJ.38
`11.0
`'-84
`
`~
`
`BESTOFF£R VALIJf.: 139.19
`BE.ST BID VALUE: 13~.86
`
`EAC/1 8().K .STANOS F"IJI< All
`ENTI?Y INTtJ A SIDe dr A NARKlT
`
`VALli£
`
`Plf!AI/IRY
`GtlliNTITY
`
`.
`
`NOTt€:MIJRE QUANTITIES 111/VE 8€£#
`IGNtJtfED. ALL £A/TRIES IIIIVE NO
`OPTIONS SPECIFIED (t/NOIIALIFIED).
`
`0005
`
`
`
`U.S. Patent
`
`Dec. 31, 1991
`
`Sheet 5 of 13
`
`5,077,665
`
`FIG. 5
`KEYST4T/ON 800k
`
`B/D S/LJE
`
`,.L//6.41£ S T
`
`(DISPLAY
`D£PTH
`tJF 3)
`
`OFFER SIDE
`WORST
`
`p39.70]_
`~-92
`
`(f)/SPLAY
`DEPT#
`OF .3)
`
`p39.6ll
`L_gQJ
`~
`?/~ 1.38.86
`~ 86
`BEST
`~
`80. f13838l
`~
`
`10.0
`
`LOW£ST
`
`0006
`
`
`
`110
`
`//4
`
`B~okiiOH~E.f
`
`DB
`
`DB
`
`~
`BOOK
`DB
`
`~
`
`/12
`BOOK
`DB
`--..-
`
`FIG. 6
`
`~ • 00.
`•
`""C
`~ ......
`('t) =
`......
`
`t::l n> r>
`
`(H
`~
`~
`
`~
`\0
`\0
`~
`
`00 =(cid:173)n>
`n>
`.....
`0'1
`0 .....
`
`~
`(H
`
`...
`01
`0
`........
`...
`........
`0'\
`0'\
`01
`
`I DIRECTED MSG. B } I
`,
`'
`I
`KLYSTATitJN ..
`8
`(LoN.opN) IDIRECTE.O MSG.-ACJ(
`124h
`!30
`
`..
`
`BROADCAST /IISG /32
`
`BROADCAST MSG 132
`
`KSB
`f. PROCESS D/RECT£0 tiiSGS.
`TO MA/A/TA/A/ ORL>ER D/3 !14.
`2. BUILD DIRECTED MSG.(cid:173)
`ACK {OPTIONAL)
`.3. PROCESS BRO,qOCAST
`MSG. 70 MAINTAIN
`BOOK DB 110 (OPT/t!JN'A~
`
`cs
`I. RECEIVE X4CT FROM KS-A
`2. SEN£) CMD-ACK TO KS-A
`3. PROCESS X/JCT AGAII'VST
`CS BtJtJK DB 118
`4. BUILD .t>IRECTED AISG. TtJ kJ-A
`5. BlVL.D /)fRECT£D .MSG 70
`KS-8 (OPT/ON,4L)
`~. BlJil.D 8ROIIDC/IST MSGS(l1PllON~
`7, Rt:CE/VE f)tRECTED MSG.(cid:173)
`ACKS. (OP7701VAL)
`8 PROCESS f)IRECTED MZ.-ACts{f1.P71011A?J
`
`I<S-A
`I. VAL/OAT£ ORO£ R
`2. MAINTAIN O..fUR DB 116
`3. BUILD XACT /IN.O SEND TO CS.
`4. PRtJC£SS CMD. -ACK MIL>
`D!RECT£D MSGS. TO
`M.-4/NmiN' tJRPER J)8 116
`S. BI.IILD AtVl> S6VO
`PIRCCTB:> MSG.-ACK(OPTIIJNAg
`6. PROCESS BR!JADCAST
`MSGS. TO MAINTAIN Bf)()k
`D8112.
`
`0007
`
`
`
`U.S. Patent
`
`Dec. 31, 1991
`
`Sheet 7 of 13
`
`5,077,665
`
`FIG. 7
`
`FIELD BYTE. FIELD /1/AM£
`SIZE TYPE
`01
`0
`PROTOCOL TYPE
`f
`BYTe
`2
`1
`01
`SCRV/CE ID
`BYTe
`2
`3
`04
`T/UESTAMP
`T/Me" TYPE:
`4
`6
`ENt/M
`MESSAGE CLASS 01
`K£Y.STATION Al)l)RESS 04
`7
`.llDD'<ESS 7YPE
`tf MS6. SE.tilJENC£ H/1.41~ 02 WORD
`
`5
`~
`
`FIG.B
`/3 MESSAGe TYPe
`7
`111 £¥ti.M'
`8 14 M£55,116£ GROUP
`t/1 ENUM
`9
`/5 /I!)ST XIICT #UMBER /)4 LOiv'G!f/tJ~[)
`IJ4 L0#6W~~D
`10 19 lxM TOK'.EN
`!I 23 t/.PJ)IiT£ /1J£#T/F/E/( 01 EN tiM
`12 24 l xM SllliJENCl NUAI.BEI< ()f BYTe
`13 25 RrRSTAT£
`01 E/tlt.IM
`14 26 7!?11/)E JfP~IIP t;IJ4NTITY ()4 t¥1111/ITI TY TYPe
`/5 30 BLOCK LIST SIZE
`tJt BYT£
`I~ .31
`)IUAI&"R OF #/tillS 01 BYTE
`17 32 NVM'&"I€ ()F LtJJf/.S 01 BYTe
`18 33 #UMBER tJf' TRAOES 01 BYTE
`19 .34 IIPM4ER Ot OI'ERIJTIONJ 01 BYTE
`
`Jl/611 BL!JCK
`F/EIJ) 8YT€
`0
`1
`
`FIG. 9
`
`fiEL.O /J/.4M€
`II/GII &t/OT£
`
`SIZE TYPe
`08
`()VOTe lYPtE
`
`0008
`
`
`
`U.S. Patent
`
`Dec. 31, 1991
`
`Sheet 8 of 13
`
`5,077,665
`
`FIG. 10
`
`L(}JV 8Lt1Ck
`FI£LL) 8YT£ FIELD ;VAM£ SIZ£ TYP£
`0
`(}8 QUOTE TYP£
`1
`LOW (}(JOTE
`
`FIG. II
`TRADE &L()CK
`FIELD BYTE FI£LD NAME SIZE TYPE
`0
`08
`r;)t/OT£ TYP£
`1
`TRAO£ Qt./()T€
`TRAf)E /9tJANTITY 04 ()UANTI7Y TYPE
`8
`2
`
`0P£R4TI01v' BLOCK FIG. 12
`
`FIELD BYTe FieLD NAM£ SIZ£ TYPE
`I
`OPERATION COl)£ 01 ENVM
`0
`1
`2
`BYTE
`Of
`INO£X
`2
`.3
`ENT,JeY TYP£ 0/
`ENt/M
`4
`tJB
`3
`BIT!eY &1/tJTe
`t;JI/tJTE TY~E
`11
`5
`/}t.I,IM/TI TY lYlE
`04
`&UAAITI TY
`15 Qt./ANTI TY ATTtfiMli.
`G
`()/ ENt/M
`
`0009
`
`
`
`U.S. Patent
`
`Dec. 31, 1991
`
`Sheet 9 of 13
`
`5,077,665
`
`FIG. 13
`
`17/WE t:JRLJER
`fiRST OF CJFrERS LAST
`
`WtJ~ST
`
`~
`
`~
`~~
`139.70
`/39.7()
`139.70
`~~
`;.o
`.5.0
`6.0
`~~
`[iJ9.611 ____ ---:-_ rm6ll
`~ ~
`l_gQJ
`~
`~
`!. il£111 OFf:£!? f.NTERS MARKEi.
`BEST
`I/4Lt/E IS £0(/AL TO TIIAT
`/),rAN ENT~Y THAT IS
`ALREAZ>Y POSITIO!Ve.D.
`
`/3970
`S.()
`
`139.70
`2.0
`139.61
`120
`
`139.70
`6.0
`139.61
`5.0
`
`2. NEW 1Jf"F€R IS POSIT!ON£D
`IN Til£ Sl/8·8001( WITII TilE
`IT IS
`SAM£ VALU£.
`PtJSITIO!V£L) AFT£R Til£
`£X/STING €NTI<Y
`
`0010
`
`
`
`U.S. Patent
`
`Dec. 31, 1991
`
`Sheet 10 of 13
`
`5,077,665
`
`FIG. /4
`
`!39.7()
`20
`
`!39.70 139.70
`.5.0
`6.0
`
`/. IIEW OF~t:R Elr'TE~S MAI?K!T.
`VALtl.! IS NOT EOt/AL
`TO THAT OF All £AIT/?Y
`TIIAT IS At.RE,If/JY
`PtJS! T/O#E LJ.
`
`/39.70
`2.0
`
`/39.70
`6.0
`
`!39.70
`.5.0
`
`2. ENTRY IS PO.SITION£D
`AT TilE TOP (),&'A NEW
`S/18- BOOK.
`Th'E Sl/~·tJtJOK 11 PI.ACOJ
`BETWEEN OTIIM Sl/4-~
`TO PRESERYE .RELATIVE
`Of'F£R 1/ALUE ORD£12/NG.
`
`0011
`
`
`
`U.S. Patent
`
`Dec. 31, 1991
`
`Sheet 11 of 13
`
`5,077,665
`
`FIG. 15
`
`/.39. 7tJ
`20
`
`7.
`/.3?.7tJ
`2.0
`
`/39.7.:?
`/.39.7()
`D.tl
`.5.0
`T/M£ O~ER
`/Jr tJFFEI<S
`LAST
`!~(}.·70 · ...
`139.7tJ 139.7()
`.s.o ·.·.:_-.··5j;
`6.0
`
`01'/"EI( IS PtJSIT!ON£1)
`liS LAST EIIT~Y IN TIME
`ORO£!( IN TilE SU8-8()0K.
`.4551/IIIE NtJ.€MAL
`MATCfii#G LOGIC.
`
`FIG. /6
`
`139.70
`/39.7() 139.7/J
`5,()
`6.tJ
`2-0
`7/ME tJ~ERtJ~OFF"ERS
`fitf?.Sr
`
`O~rEIC IS PtJSITION$AS ·
`FIRST €NTI<Y IN' l7Atl£ (Jf(l)£1(
`I# THE SVd-i!JOt?~
`
`OR/6/ItiAL Orr£/?.5
`CAtVC~LL££) AN..D
`I?EAIDYEl> FROM 8001(.
`
`0012
`
`
`
`U.S. Patent
`
`Dec. 31, 1991
`
`Sheet 12 of 13
`
`5,077,665
`
`FIG. 17
`
`77ME tJ.RLJER
`0~ ~/L)S Fl/01 FIRST-
`
`TIM£ tJROER
`tJF OF"FERS LAS7
`
`LAST
`
`11/Gh'EST
`
`~
`
`!39.7()
`2.0
`
`!39.7()
`6.0
`
`139.7()
`5.0
`
`BEST
`
`!3P.I9
`f().()
`
`1.39.19
`6.0
`
`13919
`3.()
`
`!38.86 1.38.86
`/38.86
`5.0
`/()
`4.0
`
`WORST
`
`/38.38
`.30
`
`138.74
`flO
`
`8EST 0/"rER VAI.UE:f)f./9
`tJ£ST 810 YAI.t/e: IJ9.!.
`
`/.
`
`...._ ___
`
`8t!.ST 8/LJ /11//T# T/1£ /"IJLLIJ/4//A/G
`139.19
`/().() 1/ALt/E 4/V[)t;t/-4#TITY /S PIJSTEL> .
`
`2. S/h!'E TilE 8eST LVL) VALUe A#J:J 8ST I),C,CE~ VALlie
`ARE lrf}lfl TilE SAM~ 1e JJI£.1!!£ IS tV.O VIlLI/£ SPREAlJ
`Ill(>£ SI.I.BMITT£D
`TilE #/G/IL/G#T€.0 EIVTR/€5
`.c-uA/CT/0/1/.
`TO Th'£ MA'TC#/...VG
`
`0013
`
`
`
`U.S. Patent
`
`Dec. 31, 1991
`
`Sheet 13 of 13
`
`5,077,665
`
`FIG. /8
`
`BID S/L)E
`
`T/ ,A/IE CJR.c:E/?
`LAST Or .8/0S - FIRST
`
`OFF£R S/LJE
`7/ME tJ~OER
`~F o,:-FEI?SL 6c-T
`FI.RS7----- ~~~~
`
`NIGHEST
`
`~
`
`. 1.39.70
`139.70
`2.0
`6.0
`
`139.70
`5.0
`
`BEST ~ VALtl£ SPREAD
`
`~
`
`..... ,3-8-.86-,....,.13.....,8,..-.86-,....73-8-.86---.
`S.O
`1.0
`4.0
`
`WORST
`
`LOWEST
`
`138.38
`3.0
`
`/38.38
`11.0
`
`8EST OFF£!? YALIIE:t:J'J.oJ
`B£ST8/D VALUE:1J,.19
`
`3. MATCI-IING DISCOVeRS .4 TRADE ,liT
`VALUE 139.19 OF QUANTITY 9. 0.
`4. TI-l£ BID WAS ONLY PARTIALLY TRADED,
`Qt.IANTITY OF 1.0 LErTOV€/<.
`NOTE NeW BEST 8/l> llN.O BEST IJFr£1? VA/.t/cS.
`
`0014
`
`
`
`1
`
`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
`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 the 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 from 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
`information for every entry including identification of
`the parties which identification is not to be provided for
`the subset books at the keystations in an anonymous
`trading system. 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.
`
`DISTRIBUTED MATCHIJ'OG 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
`Information 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 information
`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
`in commonly owned U.S. Pat. Nos.
`disclosed
`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- 50
`closed in U.S. Pat. No. 4,412,287, which discloses as an
`in which a computer
`automated stock exchange
`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
`
`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
`providing 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
`
`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
`
`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 ORA WINGS
`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 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(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.
`
`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(cid:173)
`·uted matching system of the present invention may be
`thought of as a computerized exchange 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 15
`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.
`Prefetably, 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
`tiona) 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 attempts to find matches between this new entry 35
`and the other bids and offers posted in the system book.
`If a match is found, 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 50
`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 it 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 directed 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 acknowledgment is a command acknowledgment
`which is preferably followed by an entry position mes(cid:173)
`sage and is as was previously mentioned, is directed
`directly back to the keystation 24a. In addit