Composite Order Book Settlement for Commodity Micro-Trades
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Solution Overview
Problem
Conventional commodity exchanges lack a system for conducting ultra-small transactions of commodities as digital assets by presenting the economic value of less than minimum unit quantity of the commodity in terms of commodity tokens per unit amount of currency, leading to high order prices and limited traders, and the involvement of High-Frequency Trading (HFT) for arbitrage causes excessive system load.
Innovation Solution
A settlement processing system utilizing a first order book for conventional commodity trading and a second order book for ultra-small transactions, with data format conversion and composite order book creation to ensure price linkage and trading liquidity while preventing excessive system load from HFT.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Measurement precision
If conventional commodity exchanges use minimum unit quantity trading with currency pricing, then price precision is maintained, but trading accessibility deteriorates due to high order prices limiting the number of traders
Solution Approach 1:
The patent segments the trading system into two distinct order books: a first order book for conventional minimum unit quantity trading with currency pricing, and a second order book for ultra-small transactions with token pricing. This segmentation allows each order book to serve different trading needs independently, maintaining price precision for conventional trades while enabling accessibility for small-value trades through tokenization.
Solution Approach 2:
The patent introduces a new dimension by creating a second order book that operates parallel to the conventional first order book. This second order book uses a different pricing dimension (token amount per unit currency instead of currency per unit commodity), enabling ultra-small transactions without affecting the precision of conventional trading in the first order book.
2Reliability
If HFT arbitrage function is involved in both trading systems, then price reasonableness is assured, but system load increases enormously due to frequent order placement
Solution Approach 1:
The patent introduces an order book conversion mechanism as an intermediary between the first and second order books. This conversion process translates orders from one order book format to another, allowing arbitrage opportunities to be exploited without requiring HFT systems to directly interact with both order books simultaneously, thereby reducing the frequency of order placements and system load while still assuring price reasonableness.
3Device complexity
If a single order book is used for both conventional and ultra-small transactions, then system simplicity is maintained, but trading liquidity deteriorates due to mixed transaction types
Solution Approach 1:
The patent segments the order book into two distinct books: the first order book for conventional minimum unit quantity trading and the second order book for ultra-small transactions. This segmentation prevents mixed transaction types from interfering with each other, thereby maintaining trading liquidity for both conventional and small-value trades while managing system complexity through structured separation.
Solution Approach 2:
The patent creates a multi-functional trading system where the first order book handles conventional trading requirements and the second order book handles ultra-small transaction requirements. Both order books operate under the same overall system framework, providing universal functionality across different trading scales without compromising the specialized needs of each transaction type.
Data Source
AI summary
To provide a settlement processing system making use of digital assets that can assure, without using arbitrage function by HET, price linkage between a first order book and a second order book and trading liquidity between the order books.[Solution]The settlement processing system is configured to convert the data format of the second order book on which listed is order information on ordered quantity for commodity tokens at certain amounts of commodity tokens per minimum unit amount of a currency, which are less than a minimum unit quantity of a commodity, into the data format of the first order book on which listed is order information on ordered quantity for the commodity at certain prices per minimum unit quantity of the commodity, merge the first order book and the converted second order book to generate a composite order book, calculate the total value of ordered quantity for each of sell and buy on the composite order book, separate the total value of ordered quantity into a first total value that is an integer multiple of a minimum trading unit on the first order book and a second total value as a remaining value, and compare sell orders against buy orders on the composite order book, to make matched sell orders and buy orders executed in order from the first total value to the second total value.