Electronic block trading system and method of operation

An electronic trading system for anonymously trading at least large block trades of securities, comprising:

• a plurality of system user interfaces for system users to communicate with an electronic trading platform for anonymously trading at least large block trades of securities in buy and sell transactions;
• a communications network for bi-directional communications between the plurality of system user interfaces and the electronic trading platform;
• and
• the electronic trading platform in bi-directional communications with the plurality of system user interfaces through the communications network, with the electronic trading platform at least comprising,
• first means for receiving firm orders to buy or sell specified securities from system users and auto-matching such firm orders to buy or sell specified securities between counterparty system users to automatically complete a transaction;
• second means for determining if trade pricing for auto-matching firm orders to buy or sell specified securities between counterparty system users is according to pricing rules, with such pricing rules specifying that trade pricing will have a predetermined relationship to a national best bid or offer (NBBO) price spread that includes auto-matching firm orders if the buy and sell prices for the security are within the NBBO, the buy and sell prices for the security are outside the upper limit of the NBBO, or the buy and sell prices for the security are outside the lower limit of the NBBO;
• third means for determining if the NBBO price spread is a valid NBBO price spread;
• fourth means for commencing and controlling a negotiation between counterparty system users that have firm orders to buy and sell specified securities on the electronic trading platform that have been considered for auto-matching at the first means but could not be auto-matched because the trade pricing was outside the pricing rules or the NBBO price spread was invalid;
• and
• fifth means for determining whether a system user should commence a negotiation with a potential counterparty according to the fourth means based on such counterparty's previous trading actions using the electronic trading platform.

A method for anonymously conducting at least large block trades of securities on an electronic trading platform, comprising the steps of:

• (A) the electronic trading platform receiving from system users firm orders to buy and sell specified securities and storing the received firm orders in storage means;
• (B) the electronic trading platform comparing each system user's firm order to buy or sell a specific security stored in the storage means with firm orders to buy or sell the specific security of counterparty system users that are stored in the storage means;
• (C) the electronic trading platform testing a national best bid or offer (NBBO) price spread to determine if it is valid, and if it is valid, then step (D), and if it is invalid, then step (E);
• (D) the electronic trading platform auto-matching and automatically completing a transaction between counterparty system user firm orders to buy or sell the specific security if trade pricing is according to pricing rules, with such pricing rules specifying that trade pricing will have a predetermined relationship to NBBO price spread that includes auto-matching firm orders if the buy and sell prices for the security are within the NBBO, the buy and sell prices for the security are outside the upper limit of the NBBO, or the buy and sell prices for the security are outside the lower limit of the NBBO and there is at least an overlapping volume of shares of such specific security, and if trade pricing is outside the pricing rules, then step (E);
• (E) at least one of the counterparty system users identified at step (B) using the electronic trading platform for testing whether the other counterparty system user passes a scorecard level test, with the scorecard level test being based on such other counterparty system user's past activities regarding trades on the electronic trading platform, and if the scorecard level test is passed, then step (F), and if the scorecard level test is failed, then negotiations at step (F) will not be commenced;
• and
• (F) using the electronic trading platform to commence and control a negotiation between counterparty system users to buy or sell such specific security based on firm orders and completing a transaction in a trade to end negotiation by a counterparty accepting an offer of the other counterparty or matching an offer of the other counterparty, or not completing the transaction in a trade to end the negotiation by a counterparty canceling the negotiation.