Blind Closing Auction With Fixed Phases and Imbalance Messaging
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Solution Overview
Problem
Existing financial exchange systems face challenges in managing high volumes of trades during market openings and closings, leading to volatility, imbalance, and inefficient resource allocation due to unpredictable closing times and order processing spikes.
Innovation Solution
Implementing a multi-staged blind auction with defined phases and rules for order acceptance and cancellation, combined with a fixed closing time and periodic imbalance messages, to ensure fair and efficient market participation.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Quantity of substance
If continuous trading is allowed during auction phases, then market liquidity is improved, but system resource allocation becomes inefficient due to unpredictable order volumes
Solution Approach 1:
The trading session is segmented into distinct phases: continuous trading phase and auction phase (opening/closing). During continuous trading, orders are processed in real-time. During auction phases, the system transitions to batch processing with fixed start and end times. This segmentation allows the system to allocate resources efficiently by predicting high volume periods (continuous trading) versus consolidation periods (auction), resolving the contradiction between maintaining liquidity and optimizing resource allocation.
2Adaptability or versatility
If closing time is randomized, then market fairness is improved, but system predictability and resource planning deteriorate
Solution Approach 1:
The system performs preliminary actions by establishing fixed, predetermined auction times (e.g., 9:30-9:35 AM for opening, 4:00-4:05 PM for closing) before the trading session begins. This allows the exchange system to pre-allocate computational resources, scale infrastructure appropriately, and notify participants in advance. The fixed timing eliminates the unpredictability of randomized closing while maintaining fairness through transparent, rule-based auction mechanics executed at known times.
3Adaptability or versatility
If all order types are accepted during auction, then market participation is improved, but order processing complexity increases
Solution Approach 1:
The system applies local quality by implementing different order type acceptances for different auction phases. For example, during the opening auction, only specific order types (e.g., market orders, limit orders) are accepted, while other complex order types are restricted. During closing auction, similar phase-specific restrictions apply. This localized approach to order type validation maintains broad market participation while reducing processing complexity by eliminating unnecessary validation logic for restricted order types during specific phases.
4Manufacturing precision
If auction duration is extended, then order matching completeness is improved, but system load and processing time increase
Solution Approach 1:
The system maintains continuity of useful action by implementing an extended trading session that operates continuously alongside the auction. During the auction phase, matching continues for orders that meet auction criteria, while non-auction orders continue to be processed in the extended trading session. This parallel continuous processing ensures complete order matching without extending the core auction duration, thereby maintaining matching completeness while avoiding increased system load from sequential processing.
Data Source
AI summary
Disclosed herein is a system having one or more non-transitory computer storage media having instructions that, when executed, cause one or more computers to receiving at least one message. Each message including a requested order to be executed during a blind auction. A filter can be applied during a plurality of auction periods to permit one or more requested orders that have an order type satisfying an order type criterion defined for a current auction period. The permitted one or more requested orders are to be processed during a closing period of the blind auction. In response to determining that an imbalance period has started, one or more imbalance messages can be generated using a reference model. During a closing period, the blind auction can be closed based on the permitted one or more orders and using a matching criterion.