Currency Option Trading System with Timed Joining Mechanism
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Solution Overview
Problem
Conventional electronic trading systems for currency options lack transparency and fail to utilize recently transacted volume as a basis for future trades, leading to disconnected pricing and reduced trading volume.
Innovation Solution
Implementing a system that allows users to 'work up' or 'join' trades based on recently executed currency options, enabling participants to trade additional volumes at the same price within a separate and timed market, with prioritization and permission-based access to enhance transparency and volume.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Loss of information
If conventional electronic trading systems match trades at different prices without relationship to previous trades, then trading flexibility is maintained, but transparency and volume utilization are reduced
Solution Approach 1:
The system performs preliminary actions by capturing and storing recently executed trade prices before new trades occur. This pre-captured price information is then made available to subsequent traders, allowing them to reference and trade at these established prices, thereby improving transparency without adding significant complexity to the trading mechanism
Solution Approach 2:
The system introduces an intermediary component that acts as a bridge between past trade executions and future trading decisions. This intermediary stores and presents recently traded prices as reference information, enabling traders to make informed decisions based on actual market activity while maintaining system simplicity
2Productivity
If a separate and timed market is introduced for working up and joining trades, then trading volume and transparency increase, but system complexity increases
Solution Approach 1:
The trading system is segmented into distinct functional areas: the primary trading market and the separate timed market for working up and joining trades. This segmentation allows each market to operate with specific rules and purposes, increasing overall trading volume while managing complexity through clear functional separation
Solution Approach 2:
The system implements periodic action through timed markets that operate in specific time intervals. During these periodic windows, traders can participate in working up and joining trades at reference prices, which stimulates trading volume while containing complexity through time-bound operations rather than continuous complex processing
3Reliability
If permission-based access and prioritization are implemented, then market efficiency and transparency improve, but ease of operation decreases
Solution Approach 1:
Permission-based access and prioritization rules are applied locally to specific trading functions and market segments rather than uniformly across all operations. This allows traders to experience ease of operation in areas where permissions are not required, while maintaining market efficiency and transparency in areas where controlled access is implemented
Data Source
AI summary
Systems and method of enabling trading in currencies are provided. A method of trading a foreign currency option on an electronic trading system according to the invention may include executing a trade of the foreign currency option between a buyer and a seller, locking the trading system with respect to the traded foreign currency option, querying the buyer whether the buyer desires to buy or sell additional volume of the option, querying the seller whether the seller desires to sell or buy additional volume of the option, and authorizing additional participants to join the trade and querying the additional participants whether each of the additional participants desires to buy or sell a volume of the option. The method may also include starting a countdown timer and displaying the timer on the graphical user interface of the buyer, the seller and the additional parties and receiving buy and sell orders from the at least one of the buyer, the seller and additional participants. Following the expiration of the countdown timer, the method preferably includes matching existing buy orders and sell orders for the option. In one embodiment of the invention, the matching occurs according to a predetermined order priority.