Brokerage Order Conversion for Net-Priced Securities Trading
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Solution Overview
Problem
Existing trading brokerage services do not allow investors to request securities trades at prices that include the commissions of securities companies, limiting the flexibility and transparency in pricing options.
Innovation Solution
A trading method and brokerage system that enables securities trades to be requested using net pricing by calculating and presenting a net price that includes the securities company's commission, while also generating orders for both gross and net prices to facilitate seamless trade execution.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Adaptability or versatility
If trading brokerage services only allow gross pricing (prices excluding commissions), then the system is simple to operate, but the pricing flexibility and transparency for investors deteriorates
Solution Approach 1:
The patent segments the order processing into two distinct parts: gross price orders and net price orders. The brokerage system separately handles gross price orders (excluding commission) and net price orders (including commission), allowing investors to choose their preferred pricing type without complicating the overall system architecture. This segmentation enables pricing flexibility while maintaining operational simplicity through dedicated processing paths for each order type.
2Loss of information
If the system generates both gross price orders and net price orders, then net pricing transparency is improved, but the order processing complexity increases
Solution Approach 1:
The patent introduces an intermediary conversion mechanism where the brokerage system acts as a mediator between the investor's net price request and the market maker's gross price format. The system automatically calculates the gross price from the net price by subtracting the commission, and generates both order types accordingly. This intermediary processing ensures pricing information transparency while managing complexity through automated conversion rather than manual intervention.
3Ease of operation
If net pricing is implemented with automatic gross price calculation, then the ease of operation for investors is improved, but the calculation and order generation complexity increases
Solution Approach 1:
The patent implements a self-service mechanism where the brokerage system automatically performs the price calculation and order generation tasks without requiring investor intervention. When an investor requests a trade at a net price, the system automatically calculates the corresponding gross price, generates both the net price order and the converted gross price order, and submits them to the appropriate parties. This self-service approach simplifies the investor's operation while containing the calculation complexity within the automated system.
Data Source
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AI summary
A brokerage system sends, upon receiving a first trade request requesting a trade of one side from buy and sell sides for a security and specifying a net price calculated as the sum of a gross price provided by a market maker and the commission of a securities company from an investor system of an investor side, order information for placing an order of the one side using the gross price and order information for placing an order of the one side using the net price to a securities company system of the securities company with which the investor has a securities account.