Note : Les descriptions sont présentées dans la langue officielle dans laquelle elles ont été soumises.
WO90/10910 I'~ lIU~iYU/l~UX77
2~2~8~ 2 -
A portion of the disclosure of this patent document
contains material to which a claim for copyright is made.
The copyright owner has no objection to the facsimile
reproductiGn by anyone of the patent document or the patent
disclosure, as it appears in the Patent and Trademark
Office patent file or records, but reserves all other
copyright rights whatsoever.
BACXGROUND
The present invention relates to computer-based techniques
for replicating a physical, open outcry auction market for
trading futures contracts on commodities including
agricultural products, financial instruments, stock market
indices, and the like.
A futures contract is an agreement providing for the future
delivery of a fixed quantity of a commodity under conditions
specified by a federally designated exchange. In general,
that contract is a firm legal agreement between a buyer and
seller to make or take delivery of the underlying commodity
and is cleared by a separate clearinghouse.
` The futures exchanges house centralized auction markets
(called designated contract markets) where standardized
contracts, based on quantity and quality of commodity, are
bought and sold, for ~uture delivery, by open outcry. It is
` important to note that the exchanges themselves do not trade
co~modity contracts, nor do they set prices at which contracts
are traded. They merely ~urnish a place where market
participants and their brokerage representatives can meet to
1 buy and sell commodity futures contracts.
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WO90/10910 PCT/US90/00877
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Floor traders are generally classified in two ways (1) as
speculators, or "locals" who buy and sell for their own
accounts, or (2) as floor brokers, who fill orders for
commission houses, producers and processors seeking to lock
in a price for their products. A "local" can take long-term
positions (i.e., weeks or months) or "scalp" over very short
periods (liquidating positions within seconds or minutes of
entering the transactions). Re may trade in one or more pits.
He benefits from the speed with which he can take or liquidate
positions, but this is in itself no assurance of a profit.
Some floor traders specialize in spreads by taking opposite
positions between future or options when the price difference
appears abnormal. Floor traders have the advantage of lower
transaction costs available to all members of exchanges.
Some floor traders execute orders for others but seldom or
never trade for themselves. These are brokers, and customers
such as commercial processors, exporters, financial
institution commodity trading funds and the like. They may
receive only a small percentage of the commissions paid by the
customer to his commission house, but the commission revenues
may be substantial depending on the volume of business. The
orders held by a floor broker at any given time are referred
to as his "deck." He is allowed to trade for his own account
if he choo~es, but can use the public orders to benefit his
own trading.
Trading generally takes place in a pit or around the
outside of a ring. All orders received by member firms are
transmitted to the exchange floor for execution and are filled
according to bids and offers in the respective pits by open
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WO90/10910 PCTtUS90/00877
2~!2~ 4 _
outcry to all members present at the time. Only one commodity
is traded in a pit or around a ring unless the volume is too
small to justify so much space. Customarily, those trading
the s~me delivery month of a commodity gather in the same area
of the ring or on the same step of the pit so that a broker
with an order can locate the particular market as quickly as
possible.
Whenever volume is high and price changes of a commodity
are rapid, it is not uncommon for different prices to be bid
and offered for the same delivery month in different parts of
the trading area at the same time. These conditions might
result in trades at prices that are never officially quoted
or might cause an order to be marked "unable," even though the
price on the order was well within the range of trading in
that commodity.
Transactions on the trading floor must be reported to the
membership and the general public. This is accomplished
through a variety of communications systems by the various
commodity exchanges. Transaction information is entered by
exchange-employed market reporters in each trading pit and is
accessible through computer terminals and electronic
wallboards on each trading floor.
At th- end of each day the clearing house, which may be a
sub~idiary Or the exchange or an independent entity, assumes
one side of all open contracts: the clearing house becomes
the buyer to each seller of a futures contract, and a seller
to each buyer. The clearing house guarantees its members the
performance o~ both sides of all open contracts.
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WO90/10910 PCT/US90/00877
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-- 5
Other aspects of the commodity markets are treated in the
literature, which includes Kaufman, ~Handbook of Futures
Markets," John Wiley & Sons, New York (1984); Rothstein, "The
Handbook of Financial Futures," McGraw Hill Book Company, New
York t1984); Gould, "The Dow Jones-Irwin Guide to Commodities
Trading," Dow Jones-Irwin, Homewood (1981); Goss & Yamey, "The
Economics of Futures Trading," John Wiley & Sons (1976);
Johnson & Hazen, "Commodities Regulation," Little, Brown and
Company, Boston (1989); R. Teweles et al., "The Commodity
Futures Game," McGraw-Hill, New York (1974); T. Hieronymus,
"Economics of Futures Trading," Commodity Research Bureau,
Inc., Ne~ York (1971); "Commodity Trading Manual," Chicago
.. , ~ .. . .
Board of Trade, Chicago (1985); and J. Schwager, "A Complete
Guide to the Futures ~arkets," John Wiley & Sons, New York
(1984).
The open outcry method of auction trading is widely
believed to be the best method of buying and selling goods
because of the fast access to the market it provides to all
prospective traders. At present the open outcry auction in
the pit produces a large quantity of information which must
be recorded accurately and quickly by hand. As markets become
more complex and international in character, those require-
ments and the need for the physical presence of human traders
in the sa~e place may excessively restrict development of the
market.
~ he information which is available to traders in pres-
ent-day trading pits includes: (1) the identities of the
other traders in the pit; (2) the market activities of the
other traders in the pit, including bids, offers, and trades
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WO90/10910 PCT/US90/008~7
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made or not; (3) the personal appearance of other traders in
the pit; and (4) selected news from outside the pit. It
should be understood that some of this information is provided
to present traders by subtle inferential communication means,
such as body language, as well as by more objective means like
news tickers and electronic bulletin boards.
Accordingly, an object of the present invention is to
replicate the action which occurs in real commodity trading
pits with an electronic system which would relieve the re-
strictions inherent in the such pits while retaining their
advantages. Other automated trading systems and the like are
disclosed in U.S. Patents 4,789,928; 4,677,552; and 4,674,044. __ _
By using the system of the present invention, traders and
their customers will have the benefit of the open outcry
auction market's time-proven efficiency in discovering pric-
es; the liquidity tha' locals bring to the trading pit; the
competition between many buyers and many sellers~that drives
prices to their most economically appropriate level; the
A transparency of the marXet, which allows traders to know who
is in the market and at what price and quantity; and the
ability to provide a superior level of market surveillance.
Mor- than a system for merely matching buy and sell orders,
the pr-Jont invention provides a system that allows traders
to create a competitive market. Its trade reaction time
closely approximates that associated with a live auction
mark-t. Information necessary for traders is presented on a
display. The re-creation of the competitive pit provides an
incentive for locals to trade, thereby maintaining the
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WO90/1091~ PCT/~S90/00877
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liquidity that is critical to auction market trading. The
system also provides market transparency, i.e., participants
can see who is in the market and who is executing trades with
whom -- an important component of a competitive market.
Finally, the present invention's ability to allow participants
to view the market, just as if they were physically present,
encourages a competitive market and enhances the ability to
detect trading abuses that may occur.
With the system of the present invention, traders can
quickly see who is in the pit, whether they are buying or
selling, in what quantity, the bids and offers, price levels
and activity in other contract months and activity in a se-
lected number of other pits.
The electronic auction market, in accordance with the
present invention, provides most of the information that is
now available in the real pits and additional information and
capabilities not available in the real pits. Only the bids
and offers that are at the market are presented, just as it
is done in the physical pit. Also, the system tabulates all
of the bids and offers by contract month and provides a short
time frame report of who traded how much with whom. In addi-
tion, the system keeps a running tabulation of the trader's
own po-~tion. The invention further ~acilitates the auction
m~rket by providing different screens for each of the dif-
ferent contract months and trading pits, but still allows
traders to move freely between contract months and trading
pits.
The present invention also reduces the back office costs
¦ to trading firms by reducing the volume of paperwork and
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WO90/10910 PCT/US90/00877
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consequent errors. In addition, the system of the present
invention automatically sends matched trades through for
clearing through the clearing organization, further reducing
costs by minimizing mismatched trades or out-trades.
SUNM~Y
In accordance with the present invention, an apparatus for
auction market trading comprises a host processor which
selectively communicates with a plurality of user terminals,
each user terminal including a selectively partitionable
display by which information is conveyed to a user and means
for entering information by which the user participates in the
auction-market.
The system advantageously employs a high-resolution color
display and a keyboard and hand-held mouse for information
entry in each user terminal. The display identifies active
traders by displaying a separate symbol or icon for each,
e.g., either a blue square for those bidding to buy contracts
or a red oval for those offering to sell. The quantity of
each trader's bid or offer is listed within each icon, as is
each trader's badge acronym, so everyone knows who's buying
and selling how much.
Also displayed on the screen is a box, which is preferably
a contrasting color such as green, listing the trader who is
currently making the market by being the first at the best bid
or offer price. When that trader's price is hit, his order
gets top priority. Trading is done by using the mouse to move
a cursor onto the icon o~ a trader and pushing a button, i.e.,
"cllcking" on the icon.
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WO90/10910 PCT/US90/00877
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In one embodiment, users also can type in the initials of
several traders and push a single button to fill a larger or-
der by simultaneous transactions with the several traders.
Similarly, the present systems can automatically match a large
order with a plurality of smaller quantity traders.
The system permits scalping and spread trading by providing
selective display of information relating to different
commodity contracts.
BRIEF DESCRIPTION o~ THE DR~WINGS
The objects and advantages of the present invention will
be better understood after a reading of the following
detailed description in conjunction with the drawings in
which: -
Figure la shows a block diagram of a portion of an ap- ,
paratus in accordance with the present invention;
Figures lb and lc show embodiments of other portions of an
apparatus in accordance with the present invention;
Figures 2a, 2b, and 2c show display partitions in ac-
cordance with present invention;
Figure 3 illustrates the presentation of supplementary
ln~ormation on a display;
Figure 4 illUstrateS a display partitioned for an auction
market during auction market trading;
- Figures 5a, Sb, and 5c illustrate successive displays of
j trader identifying information;
Figure 6 shows a display partitioned for "spread" trading;
Figure 7 shows a display partitioned for option trading;
and
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~!O 90/10910 P ~ /US90/00877
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Figure 8 shows a functional block diagram of the user
terminal instructions.
DETAILED DESCRIPTION
In accordance with the present invention, an electronic
method and apparatus are provided which facilitate the rapid
exchange of large amounts of inferential and objective in-
formation without requiring a physical congregation of trad-
ers.
Referring now to the Figures in which like reference
numerals indicate like parts throughout, Figure la shows a
block diagram of an apparatus in accordance with the present
invention comprising a host processor 100 that communicates
with a plurality of user terminals 200 (only one of which is
shown) via a communication link 300. As described in more
detail below, the host processor 100 may advantageously be one
of the "NonStop" systems manufactured by Tandem Computers,
Inc., and each user terminal 200 may be a microExplorerTm
processor, made by Texas Instruments Inc. that includes a
Model Macintosh II manufactured by Apple Computer, Inc.,
having a Radius display. It will, however, be appreciated
that other suitable devices are commercially available. One
mbodiment o~ a user terminal 200 is illustrated in Figure lb
whlch ~hows a h~gh-resolution display 201, a keyboard 202 and
a mou~e 203.
The host processor 100 carries out a plurality of in-
struction modules, which can be written in any suitable com-
put~r language, such as COBO~ or TAL. One of a plurality o~
ho~t receiver moduies 110 receives communications from a
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WO90/10910 PCT/US90/00877
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selected one of the plurality of user terminals 200 that are
logged into the system. Each host receiver module llo is thus
a port into the host processor 100, which is activated
initially by an attempt at connection by a user terminal. It
will be appreciated that the greater the number of host
receiver modules 110 that can be implemented by the host
processor, the greater the number of traders who can partic-
ipate in the auction market.
In operation, a host receiver module 110 receives
transactions and other information input to the system at a
user terminal and electronically attaches or associates that
information with a time of receipt indication. Such time
stamping is important for audit and integrity functions of the
system. The received transaction and time-stamp are then
stored temporarily in a host-in queue in the receiver module,
and the host receiver module 110 causes the host to send an
acknowledgment of receipt to the transmitting user terminal.
In some situations, the host receiver module 110 would cause
the host processor 100 to send a not-acknowledged message to
the sending user terminal so that the information could be
retransmitted. Such situations would typically occur when the
host-in queue is temporarily full or when an error in the
form~t of the information, such as might arise from a noisy
communication link, occurs.
The host-in gueue in the host receiver module 110 is
advantageously realized by any suitable randomly accessible
bur~er memory rather than a ~irst-in, first-out !FIFO) buf~-
er. A~ described further below, by using a random access
buffer, the host processor can sort the information resident
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WO90/10910 PCT/US90/00877
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in the buffer and selectively prioritize processing of that
information.
A receiver module llO receives the information from the
user terminals 200 and places it in the host-in queue in a
predetermined time sequence. The receiver module llO thus can
advantageously arrange for processing of information from a
first user terminal before processing of information from a
second terminal despite the host receiver's earlier receipt
of the second terminal's information. For example, trades by
a user in Japan could be processed by a Chicago-located host
processor before trades from a Chicago user are processed.
In this way, communications link delays can be compensated by
the system so that the system access time will be equal for
all users.
The Q-monitor module 120 examines the information and time
stamps in the host-in queue, and moves that information into
a delayed-host-in queue memory 130 at the time determined by
the receiver module llO which placed the information in the -
host-in queue. For audit and record-keeping purposes, the
Q-monitor module 120 adds another time-stamp to each packet
of information, and it moves and outputs thë packets to the
dolayed-host-in qu-ue, which can be a FIFO buffer, for
tran~or to a transaction processor 140.
Tho transaction processor 140 of the host processor lO0 is
initialized when the host processor is initialized. In a
prototype version, initialization would consist, in pertinent
part, o~ the loading into on-line memory from bulk storage,
o.g., a hard disk memory, the host database of authorized
usors, transactions, screen displays, etc. After
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WO90/10910 PCT/US9Q/00877
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initializing, the transaction processor 140 accepts informa-
tion from FIF0 130. The processor 140 preferably time-stamps
each information packet from the FIF0 130, and verifies that
the information is valid, e.g., represents a type of
transaction performed by the system. If valid, the
transaction processor carries out the transaction by updating
host primary and secondary databases that reside, typically,
on a hard d_s~; memory. The primary and secondary databases
are part of tne redundancy of the host processor 100 and thus
contribute to the system's failure resistance.
After updating the host primary and secondary databases,
the transaction processor 140 inserts into a host-out queue
the appropriate information for transmission to the user
terminals. For audit purposes it is ~advantageous to add
another time-stamp to each packet of information as it is
inserted in the host-out queue, and to write the time-stamped
information to an audit log. In a prototype version, at
predetermined intervals, the host database would be dumped to
bulk storage and, preferably, a backup bulk storage, and
primary and secondary system recovery logs would be reset.
In the prototype version, the primary and secondary system
recovery logs serve the purposes of the host primary and
econdar,v databases.
The information in the host-out queue is communicated to
the user terminals through a plurality of host sender modules
150, there being one for each user terminal logged into the
system. The host sender module also advantageously time
stamps the information as it sends it to the user terminals,
and receives an acknowledgement of receipt message from the
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WO90/10910 PCT/US90/00877
user terminal~' In ~ e ëvent of a transmission error, the host
sender module retransmits the information to the user
terminals. It will be appreciated that the host sender module
also transmits a message indicating that the host processor
is still "alive" in the event that the host-out queue is empty
due to a period of market inactivity.
As described in more detail below, each user terminal 200
preferably includes a large proportion of the instructions
necessary for carrying out the present trading system. Those
instructions are advantageously implemented in LISP, PASCAL
or C, although LISP is preferable because of the flexibility
it provides. Referring now to the user terminal 200 shown in
the block diagram of Figure la which is representative of the
plurality of user terminals which may be logged into the
system simultaneously, a terminal receiver module 210 is
activated by the attempted transmission from a host sender
module 150 and receives the information transmitted. After
time-stamping the received information, the terminal receiv-
er module 210 places the information in a terminal-in queue
220, such as a FIFO buffer, and transmits an acknowledgement
message to the host processor 100. If the terminal-in queue
220 is ~ull or i~ an error in the information is detected by
th~ t~rminal receiver module, the module 220 transmits a
not-acknowledged message to the host processor. The terminal
receiver module 210 also handles the "alive" message from the
host proce~sor 100 in the event o~ little market activity.
In~ormation in the terminal-in gueue 220 is removed by a
terminal transaction processor 230 which time-stamps the
information and updates the terminal's database and displays
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WO90/10910 PCT/US90/00877
2~3~3
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in accordance with the informatio~ through a FIFO buffer 240.
As described in more detail below, those updates reflect
market activity and certain other information requested by the
user.
The information in the FIPO 240 presented to a terminal
user and information input to the terminal by the user are
transmitted through a terminal user interface module 250. The
module 250 has been designed using the ACTION!Tm software
development tool available from Expertelligence, Inc. The
ACTION!Tm tool greatly facilitates the writing of window-type
code for controlling the display of the microExplorerTm
computer. The module_250 carries out a suitable log-in
procedure to the host processor l00, thereby causing the host
processor to initialize the user terminal database with
suitable information from the host database.
After the user terminal 200 is initialized via the terminal
user interface module 250, a terminal sender module 260
establishes communication with the host processor l00. The
sender module 260 removes data from a terminal-output queue
270, such as a FIFO buffer, attaches a terminal address and
time-stamp and communicates the information to the host. When
the terminal-output queue 270 is empty for a predetermined
tim- p-riod, the sender module 260 transmits a suitable
t-rminal "alive" message to the host. The sender module 260
i~ also responsive to the acknowledge, not-acknowledge, error
messages received at the termin2l from the host processor.
In a pre~erred embodiment, a large proportion o~ the
instructions for carrying out the trading system of the
present invention are written in LISP or C and are resident
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WO90/tO910 PCT/US90/00877
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in each user terminal 200. In this way, the system's pro-
gramming is easy to accomplish and the capacity of the com-
munication link 300 is minimized. Referring to Figure 8,
which is a block diagram of the organization of the instruc-
tions included in each user terminal 200, the instructions 400
resident in a user terminal advantageously comprise a plu-
rality 410-460 of "objects", as they are conventionally re-
ferred to in LISP programming, or "applications", as they are
referred to when using the ACTION!Tm software development tool
kit. It will be understood that "objects" and "applications"
correspond generally to "subroutines" in other programming
languaqes. They include data and lo~ic structures, including~
suitable pointers and other indexes, that enable execution of
user requests and direct the logical flow of program execution
among several "objects."
The START SCREEN application 410 is a LISP object which is
executed automatically at turn on of a user terminal 200. The
START SCREEN application 410 verifies proper initialization
of the terminal 200 and queries the user whether logging into
the system is desired.
; The LOGIN application 420 is executed in response to an
appropriate user input, whether via mouse, keyboard or other
entry means. The LOGIN application 420 queries the user for
hi~ user name and ~or his password which, when input, are
communicated to the host processor 100 for review. If the
us-r name and password are authorized for access, the LOGIN
application 420 responds to receipt of an authorization sig-
A~ nal fro~ the host processor by transferring execution to the
~ MENU application 430. If authorization is denied, e.g.,
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WO 90/10910 ~ ~ r~
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because the authorized user had previously requested his
terminal to be "locked out" during his vacation, execution is
returned to the START SCREEN application 410.
Once access is granted to the user terminal 200, a MENU
application 430 is executed which queries the user as to which
of the other applications, i.e., VIEW PIT 450 and ENTER PIT
460, is desired. As described further below, the interrela-
tion of the applications 430-460 is such that logical execu-
t~on of the user terminal instructions can move rapidly and
easily among the applications.
The SELECT PIT application 440 responds to user inputs
indicating which of the trading pits, e.g., financial secu-
rities, farm commodities, etc., is desired for view or entry.
Depending on the pit selected and the action desired, logical
execution of the user terminal program would be directed to
the VIEW PIT application 450 or the ENTER PIT application 460.
In addition, it will be understood that in response to the
user input, the latest relevant information is communicated
to the terminal 200 from the host processor 100.
The VIEW PIT application 450 implements the aspects of the
present trading system relating to identifying to the user who
is in the trading pit selected for viewing. Thus, as
describ-d in more detail elsewhere, the application 450
includes LISP objects for generating trader icons with prop-
er identifications, for generating pop-up windows that pro-
vide additional identi~ying information about a selected
trader icon, and ~or quitting the VIEW PIT application 450 and
returning to one Or the other applications.
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WO90/10910 PCT/US90/00877
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The ENTER PIT application 460 is the LISP object which
implements the active tradin~ features of the present inven-
tion. The ENTER PIT application 460 advantageously compris-
es (l) a Pit Pane object for creating the trading arena por-
tion of the display, (2) a Pit Markets object for creating the
display portion relating to other markets in the pit displayed
in the trading arena, (3) an Other Pits object for creating
the display portion relating to the user-selection of other
pits and markets, and (4) a Supplementary Information object
for creating the display portion relating to the
user-selection of news services and telephone, as well as the
personal trading history, recent trades list, trader
entry/exit list, and for dealing with user entry of informa-
tion.
The Pit Pane object itself comprises (i) a price display
object for generating the blue and red price displays and
their included information for the current market, (ii) a .-
plurality of trader objects for generating the randomly
positioned trader icons in the trading arena, and (iii) a
priority box object for generating and controlling the green
priority box display. In addition, the price display object
also includes two trader objects for generating the user's own
trad-r lcon in the trading arena, one for bidding and one for
offering.
The Pit Markets object which generates the portion of the
ENTER PIT application's display relating to other markets in
the pit o~ the trading arena also advantageously executes a
price display object and two trader objects, one for bidding
and one for offering, for generating the user's own icon in
.
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WO90/10910 PCT/US90/00877
V
-- 19 --
the other markets displayed on the user's terminal screen.
Similarly, the other Pits object executes a suitable price
display object for the portion of the display relating to
other pits. It will be noted that since, in the preferred
embodiment, the other pits' price displays do not include
trader icons, the Other Pits object need not execute a trader
object.
Furthermore, the Supplementary Information object executes
individual objects for carrying out the other aspects of the
trading system, e.g., the telephone, the display of which
traders have entered and left the pit since the user has
entered, the display of the most recent trades made in the
pit, the user's personal trading history, the display of
messages from the host processor lO0 and user terminal 200,
and the user's input, e.g., trading activity, screen
formatting, etc.
It will be understood that subdividing the tasks of the
terminal instructions into LISP ob~ects in the manner de-
scribed significantly minimizes the complexity of and effort
necessary for the implementation of the present system.
The bandwidth or other equivalent measure of capacity
reguir-d Or communication link ~00 between each user terminal
200 and the host processor l00 depends on the volume of
tran actions to be carried out by the present auction trading
1 ~ystem. It has been found that for after-hours trading at the
Chicago Board of Trade, a normal telephone link's capacity of
9600 BAUD is sufficient because of certain efficiencies
inherent in the Macintosh family of computers. Those effi-
ciencies relate to the amount of data needed by one Macintosh
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WO90/10910 PCT/US90/00877
~ 20 -
computer to inform a second Macintosh of the contents of its
output display, and are inherent to the Macintosh operating
system.
In a preferred embodiment of the invention, communication
between the user terminal 200 and the host processor 100 is
carried out through a combination of two-way, interactive
communication and one-way, "broadcast" communication. The
"broadcast" feature is implemented by the host processor
sending to all logged in user terminals the information
necessary to update their displays in light of the trading
system activity. Such bursts would preferably occur at
predetermined _int rvals, e.g., one second. The remaining
capacity of the communication link 300 is then devoted to
interactive communication. As described above, it will be
understood that suitable selection of hardware components can
minimize the link capacity needed for the system. Of course,
communication technologies which provide very high capacity
links, e.g., fiber optic links, television vertical blanking
interval links, etc., can also be used.
Recognizing that the broadcast of system updating informa-
tion occurs only at predetermined intervals, the trading
system preferably resolves timing conflicts by noting which
of conflicting user actions arrived first at the host proces-
~or 100. For example, if a first user clicks on a second
us~r's bid icon after the second user has changed his/her bid
guantity but before the first user's display was updated by
.~ , . ... .
the host broadcast, the trading system preferably would indi-
cate a completed trade for the second user's later quantity.
Similarly, if the first user's clicking on the second user's
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- - .c: .
- . - . - . . - . . .
WOgO/10910 PCT/US90/00877
~7.~ 9 ~
- 21 -
bid icon arrlves at the host processor before the second
user's changing his/her quantity arrives, the trading system
preferably indicates a completed trade at the second user's
earlier quantity.
It will be understood that the phrase "arrives at the host"
can include additional timing or delay factors that may be
added to communications from selected user terminals. As
described above, such additional factors may be used to
equalize communication link propagation times for widely
separated users, or to favor local users over remote users.
Referring to Figure 2a, there is shown a preferred or-
ganization for trading information presented on the display
201 of the user terminal 200. The trading screen is advan-
tageously partitioned into three parts: a trading arena or
trading pit area 205, any other pits area 206, and a
supplementary information area 207. The other pits area 206
presents price displays for a plurality of user-selected
markets in pits other than the pit displayed in the trading
pit area 205. Three such other pit price displays are
~illustrated in Figure 2a, but it will be understood that some
;other number of price displays may be provided consistent with
th- siz- constraints o~ the display.
-The elements o~ the display partitioning of a trading
creen ar- illustrat-d in more detail in Fi~ure 2b as follows:
C~RRENT CONTRACT PRICE DI82LAY: This price display 205-l
~hows the current bid price in a blue shaded area and the
curr-nt ofrer price in a red shaded area and the total
quantities (e.g., 925 bid, 750 of~ered) available. An acro-
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- '
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WO90/2~910 PCT/US90/00877
~ ~ 2 ~ 9 - 22 -
nym USH indicates that the prices given are for a March bond
contract.
MEMBER ICONS: A small red oval 205-2 is called a member
Offering icon. The icon includes a member's identifyir.g
acronym and the number of contracts he/she is offering. For
example, member DAS is offering 50 contracts on March bonds.
A small blue box 205-3 is called a member Bidding icon. This
icon also contains a member's acronym and the quantity being
bid for. For example, member GA is bidding for lOO contracts
on March bonds. In the preferred embodiment, the display
shows the bids and offers that are at the market or the icons
would not appear on the trading screen.
The shapes and colors of the icons representing traders are
selected to convey a substantial amount of pertinent
information. In a preferred embodiment, a trader who is
bidding is represented by an icon which is a blue square or
other polygon. A trader who is offering is represented by an
icon which is a red oval or other curved shape. On an
identification display screen described in more detail below,
a trader who is present in the pit, but is neither bidding nor
offering, may be represented by a green third shape, and those
who have left the pit may be indicated by a colorless icon
having a shape in accordance with the absent traders' actions
whil- in the pit.
Other important information conveyed by the icons are the
identity of the traders in the pit and quantity that each
trader is bidding or offering. This information is provided
by including an alphanumeric string, such as a three-letter
tag, for the trader's identity and a numeric string for the
, .
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. . . . . ... - . . . -. . - .
W O 90/10910 PCT/US90/00877
2 ~ 2 --; ~
- 23 -
trader's quantity in each icon. As described in more detail
below, additional information about each trader can be
accessed through calling up to the display one or more screens
for providing such information, and some traders may be
permitted to have no quantity showing in their icons.
PRIORITY BOX: The green box 205-4 in the upper left-hand
area of the trading screen is the priority box. The offer or
bid of the first member to make the market is placed in the
priority box and automatically becomes the first bid or offer
hit. As shown in Figure 2b, member CZ's bid for 100 contracts
made the market at 09.
TRADING ARENA: The large area 205-5 of the trading pit
screen is the trading arena. The icons of all the members who
are at the bid or on the offer appear randomly positioned in
the trading arena. Only one contract at a time can be placed
in the trading arena.
CURRBNT PIT PRICE DISPLAY: The price displays 205-6 at the
bottom of the screen (eight are shown in Figure 2b) are for
other contracts within the US Treasury bond pit. These
displays show the current bid and offer prices and total
guantities available in other contracts (including spread
mark-ts) within the Treasury bond pit. The current pit price
dlsplays may include indicators, e.g., Pl, P2, P3, etc., which
r-lat- the contracts represented by the price displays to
price display keys on the keyboard (see Figure lc).
O~BR PIT~ PRICB DI8PLAY8: The top right hand side of the
trading screen contains the other pits area 206 showing three
price displays for contracts outside the Treasury bond pit.
Users can choose which pits and contracts they wish to view.
; . . . . . .. ...... . . .
., . :. . .:
,. - - . ~ .
.
- . , . . .- ... . - ~ ~ .
WO90/10910 PCTtUS90/00877
~ 24 -
The displays give bid and offer prices and total quantities
available.
The supplementary information area 207 may include the
following:
PIT T~ADE SUMMARY BOX: This box or window displays the
most recent trades that have occurred in the pit on the
trading screen. For trades with brokers, the pit trade sum-
mary box preferably shows the clearing firm name of the bro-
ker's customer.
PERSONAL TRADE SUMMARY BOX: A personal trade summary box
or window computes the user's own trading position. For exam-
ple, if member KIN most recently sold 75 USZ to member JOH at
a price of ll, the entry in the personal trade summary box
shown on member KIN's trading screen would include "-75Q
ll JOH USZ."
NEW8 8ERVICES BOX: A news services box or window provides
the text of items and reports carried by public or private in-
~ formation services such at Reuters and Dow Jones.
- ~ELEPHONE: A telephone box or icon is an area provided for
the telephone feature of the system, whereby a user can ini-
tiate a private conversation with another user by clicking on
the telephone icon and, for example, then clicking on the
; oth-r u~er's icon.
~ 88Aa~8: A messages box provides the text of messages
from the host processor and the local user terminal processor,
.g., for calling improper keystroke se~uences to the user's
attQntion.
.~ .
It will be understood that other information may be
provided to the user terminal display appropriate to the
;.1
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WO90/tO910 PCT/US90/00877
~2~v
- 25 -
operation of an auction trading system, although it has been
found that the substance and arrangement of the user terminal
display in the manner described is successful not only in
substantially replicating the "look and feel" of a live
auction market, but also in providing additional features and
advantages which are only available from a system in
accordance with the present invention. ,
As described above, the trading pit area 20S of the trading
screen may be suitably reconfigured according to the user's
preference to show one or all of the marXets in a given pit.
As shown in Figure 2c, the trading pit area can be filled with
price displays and not-retain-any trading arena area 205-5.
It will be understood that other configurations of the trading
screen are also possible.
Referring now to Figure 3, there is illustrated part of the
information presented in the supplementary information area
207 of the trading screen. As described above, the area 207
preferably includes a user-private personal trade summary box
207-1, a telephone box or icon 207-2 and a news service box
207-3. Selecting one of the news services indicated in the
box 207-3 causes the system to form a window 207-4 in the
upplementary information area for presentation of information
~rom th- selected news service. Also illustrated in Figure
3 is the pit trade summary box 207-5 which provides a list of
the most recent trades occurring in the pit on display. As
shown, five trades may be listed with each listing appearing
~or a predetermined time interval, e.g., thirty seconds. It
will be understood that another number of trades, e.g., seven,
may be listed in the pit trade summary box 207-5, and the
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WO90/10910 PCT/US90/00877
~ .9 ~ ~ 3 - 26 -
period of display may also ~e varied according to the usual
considerations and constraints such as space available on the
display.
r igure 4 illustrates how a trade is indicated on the
trading screen by showing an arrow between the relevant users.
It will be understood that other means of indicating trades
may also be employed, e.g., an arrow plus a starburst-like
indication or blinking trader icons. Those indications
contribute to a video-game-like look and feel that may be
achieved by the present trading system and help to reDlicate
the emotion of a physical auction market. It can be noted in
Figure 4 that it is a preferable feature of the system that
the icon of the trader making the market, i.e., CZ is making
the bid market at 9 in Figure 4, is shown in the priority box
and that trades are completed by the system only with that
market maker until his/her quantity is met. After that time
trades may be carried out between tne icons randomly posi-
tioned in the trading arena. The participants of these trades
are determined completely by the users. Resting orders com-
prising bids or offers which are not at the market may be
entered into the system; such orders will not appear in the
trading arena until all bids or offers at the market are met.
Re~-rring to Figures 5a, 5b and 5c, there are illustrated
scr-ens of the user terminal display when the VIEW PIT appli-
cation 450 is executed. A first identification screen shown
in Figure 5a preferably indicates which traders are present
in the pit, i.e., are viewing the particular pit on their
trading screens, but are not making a bid or offer at the
:
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WO90/10910 PCTtUS90/00877
~2~
- 27 -
market. The trader icons shown in Figure 5a are advantag-
eous]y color and/or shape coded to indicate the intentions or
status of the traders. It will be appreciated that shape-
coding may be employed to compensate for user or user terminal
color-blindness. Figure 5b shows a pop-up window that can be
accessed by clicking on member KIN's icon in the information
screen of Figure 5a, Figure 5c shows a pop-up window that can
be accessed from the prior window, e.g., by clicking on the
KIN icon again. It will be understood that the present system
permits users to call up the identification screens whenever
desired after logging into the system.
Figures 6 and 7 illustrate possible organizations of the
trading screen for spread trading and option trading, respec-
tively. It will be appreciated that the quantity of informa-
tion needed to be presented on the spread trading screen
limits the number of partitions of the trading arena of the
user terminal display that can be made. That limit is desir-
able in order to maintain a useful size for the spread parti-
tions. Four spread partitions are shown in Figure 6, each of
which includes a suitable price display and participating
trader icons. It will be understood that a user can mix
spr-ad partitions with outright partitions on his display.
R-f-rring to Figure 7, the trading arena partition of the
u~-r terminal display for options trading would advantageously
include more than one type of option transaction. Combina-
tion8 of different options, strikes, and expirations are typi-
cally referred to as packages. Packages such as # 23 and # 4
are illustrated in the figure.
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WO90/10910 PC~/US90/00877
!~
- 28 -
Referring again to Figure 2b, the following will illustrate
the operation of the system. Figure 2b represents a possible
trading screen for a hypothetical Member TCO. The keys re-
ferred to below are illustrated in Figure lc; it will be
understood that the keyboard may be a device that is dedicated
to the trading system or employs suitably identified keys
provided on a conventional computer keyboard.
(i) To hit a bid or take an offer in MAR89 bonds (ab-
breviated "USH")
- mouse: enter amount (if less than what icon is
showing), point and click on icon with mouse in
the appropriate partition.
- keyboard: enter amount (if less than what icon
is showing), type member acronym, press BUY (or
- SELL) action key.
e.a., to buy 50 MAR89 contracts from member TNT
TNT + (press BUY key).
- e.a., to buy 40 MAR89 contracts from member TNT
40 + TNT + (press BUY key).
.~ :
(ii) To hit a bid or take an offer in JUN89 bonds
To hit a bid or take an offer in JUN89 bonds Member
TCO must have the JUN89 market enter the trading
~ arena. By clicking on the JUN89 price display or
- pres~ing the P2 key and the ENTER key, member TCO can
have the JUN89 market enter the trading arena. The
MAR89 market moves into the P2 display. once the
- .
` JUN89 market has entered the trading arena, member TCO
... .
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- WO9~/10910 PCT/US90/00877
2~2~
- 29 -
can follow the same steps as in (i) above to hit a bid
or take an offer.
In summary:
- mouse: click on the JUN89 price display to have
the JUN89 market enter the trading arena. Enter
amount (if less than what icon is showing), point
and click on icon with mouse in the appropriate
partition.
- keyboard: press the P2 key and the ENTER key to
have the JUN89 market enter the trading arena.
Enter amount (if less than what icon is showing),
type member acronym, press BUY (or SELL) action
key.
,
e.a., to buy 50 JUN89 contracts from member XIN
(press P2 key) + (press ENTER key) + 50 +
- KIN + (press BUY key.)
(iii) To enter a bid or an offer in MAR89 bonds
; - mouse: enter amount (press "~" key and enter
price if bidding at a price different than the
current market price), point and click on
.. . .
~ bid/offer box for MAR89 bonds with mouse.
~y
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WO90/10910 PCT/US90/00877
2 ~
- 30 -
- keyboard: enter amount (press "@" key and enter
price if bidding at a price different than the
current market price), press BID (or OFFER)
action key.
e.a., to bid for 50 MAR89 contracts at price os
(c-~rrent market bid price is 09)
50 + (press BID key).
,' e.a., to bid for 50 MAR89 contracts at price lo
, ,,,, ,, , ,,,(,current market bid price is 09)
50 + (press @ key) + 10 + (press BID
key).
.
(iv) To enter a bid or an offer in JUN89 bonds
.
' >~ Assume that the MAR89 market is in the trading arena. '
,~ - mouse: enter amount (press "@" key and enter
price if bidding at a price different from the ,
; current market price), point and click bid/offer
~, box for JUN89 bonds with mouse.
~, - keyboard: press the P2 key, enter amount,(press
" key and enter price if bidding or offering
~ at a price different from the current market
'~ price)~ press BID (or OFFER) key.
:~s
~ .
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WO90/10910 PCT/US90/00877
~ 31 - ~2~3
e.a., to bid for 50 JUN89 contracts at prlce 09
(current market bid price is 09)
(press P2 key) + 50 + (press BID key).
e.q., to bid for 50 JUN89 contracts at price lO
(current market bid price is 09)
(press P2 key) + 50 + (press @ key) + lO +
(press BID key).
(v) To use group feature
- mouse: point and click on icons in the trading
arena with mouse while holding down '!shift" key.
- keyboard: type member acronym, press "+" key,
type next member acronym, press "+" key, etc.
End with "BUY" key or "SELL" key.
~.
;~ e.q., to group member KIN and member BJG
,^'. ''
KIN + (press "+" key) + BJG + (press "BUY" key
or "SELL" key).
.
;~ (vi) To cancel a bid in MAR89 bonds
.~ .
Aqsu~e that the MAR89 market is in the trading
arena.
.~ ' , .
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WO90/10910 PCT/US90/00877
- 32 -
- mouse: point and click on your bid icon for
MAR89 bonds with mouse.
- keyboard: press CANCEL-8ID key.
(vii) To cancel a bid in JUN89 bonds
Assume that the MAR89 market is in the trading
arena.
- mouse: -point and click on your bid icon for
JUN89 bonds with mouse.
.' ;.
- keyboard: press P2 key, and then press
- CANCEL-BID key.
e.a., to cancel your bid for 10 JUN89 contracts
at price O9
(press P2 key) + (press CANCEL-BID key).
i
(vill) To canc-l all bid~ in all bond markets
c _ mou~e: point and click on bid/offer icon in any
markot whilo holding down the OPTION key.
- k-yboard: press the CANCEL-BOTH key whil-
holding down th- OPTION key.
. ~ .
~ SU8SlmllE SW~
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WO9~/10910 PCT/US90/00877
~ J~9~9
- 33 -
e.a., to cancel your bid for l0 JUN89 contractsat price 08 and your offer for lO SEP89 contracts
at price 26.
(hold down OPTION key) ~ (press CANCEL-BOTH
key).
It will be understood that the foregoing description is
illustrative only and that one of ordinary skill in the art
will recognize various modifications which do not depart from
the spirit and scope of the invention that are to be limited
solely by the following-claims. ~
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