Atomic Multi-Leg Order Execution to Prevent Legging Risk
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Solution Overview
Problem
Existing trading systems face challenges in executing combination orders without the risk of legging, where individual legs of a multi-leg order may not be fulfilled as expected, leading to potential adverse positions and reduced liquidity access for end-users.
Innovation Solution
Implementing a conditional mass order system that allows traders to specify execution conditions, ensuring all orders are fully satisfied or none are executed, thereby eliminating legging risk and optimizing transaction processing.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Reliability
If individual transaction requests are processed separately for combination orders, then the system can handle simple orders efficiently, but legging risk occurs where not all legs are fulfilled as expected
Solution Approach 1:
The patent merges multiple individual transaction requests into a single atomic transaction block. The match engine processes all legs of a combination order simultaneously as one unit, ensuring that either all legs are executed or none are executed. This eliminates legging risk while maintaining processing efficiency through consolidated handling rather than separate processing of each leg.
Solution Approach 2:
The system performs preliminary validation by checking whether all legs of a combination order can be fully satisfied before executing the transaction. The match engine determines in advance if the order can be completely filled based on current market conditions, and only then proceeds with execution. This preliminary check prevents partial executions that would create legging risk.
2Reliability
If combination orders are processed as atomic units, then legging risk is eliminated, but the computational load on the match engine increases
Solution Approach 1:
The match engine performs preliminary determination of satisfiability for all legs before executing the atomic transaction. By checking in advance whether all legs can be fully satisfied, the system avoids unnecessary execution attempts and can reject orders early if they cannot be completely filled. This preliminary validation reduces overall computational load while maintaining atomic execution guarantees.
Solution Approach 2:
The system creates a virtual copy or representation of the combination order structure that allows the match engine to evaluate and validate all legs simultaneously without actually executing the full transaction yet. This virtual modeling enables efficient pre-computation of execution feasibility, reducing the computational burden during actual transaction processing while ensuring atomicity.
3Adaptability or versatility
If traders submit individual orders for each leg, then the system processing is simpler, but liquidity access is reduced and legging risk increases
Solution Approach 1:
The patent enables traders to submit multiple individual orders as a single combined order structure to the match engine. The system merges these individual leg requests into one atomic processing unit, allowing traders to access liquidity across multiple legs simultaneously while maintaining the simplicity of a single submission. This consolidated approach improves liquidity access without significantly increasing the complexity at the trader's end.
Data Source
AI summary
Systems and methods are disclosed for ensuring execution of multiple inter-dependent transactions in an electronic data transaction processing system in which a plurality of data items are transacted by one or more hardware matching processors associated therewith that match a combined electronic data transaction request comprising a conditional execution instruction and a plurality of component electronic data transaction request messages, each for transaction of a different data item of the plurality of data items.