Automated fixed income trading

Abstract

A method and system is provided for automated trading of fixed income securities which enables institutional investors, broker dealers and others, to transact directly and anonymously for the purpose of trading investment grade, high yield corporate bonds, municipal bonds or other fixed income securities. A financial institution acting as a Fixed Income Securities system sponsor can act as counterparty to transactions, from trade execution through settlement, and can also serve as a credit intermediary. Computer systems are utilized in conjunction with an electronic communications network to facilitate such fixed income security trading activities. Software routines can direct a trader to various fixed income securities available according to specific criteria put forth by the trader. Software routines can also provide information and services related to the automated trading of fixed income securities. Data relating to trading a fixed income security is transmitted from a Fixed Income Trading (FIT) system and information relating to the sale of a fixed income security is received. A live order, based upon the sale information received, can then be executed or transmitted to a point of execution. The live order provides that the FIT system acts as counterparty to each transaction such that a client trader can remain anonymous to a party on the other side of a trade. In this manner, a first trade can be executed between a party selling a fixed income security and the FIT system, and a second trade can be executed between the FIT system and a party purchasing the fixed income security. In addition, the FIT system operators can commit to market liquidity for the fixed income security traded. Numerous types of fixed income securities can be traded, including investment grade, high yield corporate bonds, municipal bonds or other types of securities.

Description

BACKGROUNDThe present invention relates generally to an automated method and system for trading fixed income securities. More specifically the present invention provides an automated trading forum which enables institutional investors, broker dealers and others, to transact and trade directly and anonymously, investment grade corporate bonds, municipal bonds or other fixed income instruments. The system sponsor acts as counterparty to all transactions, from trade execution through settlement, and can also serve as a credit intermediary.Electronic networks have eliminated many of the costs associated with an open outcry system. Electronic trading systems eliminate the need to maintain a trading representative on a market floor. Small entities and individual investors now have access to information and trading vehicles that were previously available only to institutional investors. However, the complexities of the fixed income market, wherein a multitude of securities each has distinc...

AI Technical Summary

Benefits of technology

Accordingly, the present invention includes a method and system providing automated trading of fixed income securities which can enable institutional investors, broker dealers and others, to transact directly and anonymously for the purpose of trading investment grade, high yield corporate bonds, municipal bonds or other fixed income securities. A financial institution acting as a fixed income security trading system sponsor can act as counterparty to transactions from trade execution through settlement, and can also serve as a credit intermediary. Computer systems are utilized in conjunction with an electronic communications network to facilitate fixed income security trading activities. Software routines are utilized to direct a trader to various fixed income securities available according to specific criteria put forth by the trader. Software routines can also provide information and services related to the automated trading of fixed income securities.

Problems solved by technology

However, the complexities of the fixed income market, wherein a multitude of securities each has distinctive characteristics, have caused many trading systems to be limited to a particular type or class of securities.

Generally, automatic execution of fixed income transactions is limited by regulatory requirements.

For example, a customer may have a limited time to execute a trade at a price on the wire.

However none of the known systems provides a liquidity commitment, which can be essential to the success of a trading environment.

However, the market size and complexity for fixed income products and the established roles of market participants have heretofore hindered such an embodiment.

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