Dark Order Block Auctions Using Midpoint Reference Pricing

The patent introduces an intermediary auction system that sits between dark order block trades and the public market. The auction system receives orders from multiple participants, builds an order book, and executes trades through a reference price mechanism. This intermediary structure allows liquidity to be accessed efficiently while preventing direct information leakage to the public market, as the auction system acts as a buffer that processes trades without revealing participant identities or order details to external observers.

The patent implements a feedback mechanism through the reference price calculation and order book system. The reference price is derived from midpoint bid and ask prices in the financial market, providing a market-based feedback signal that prevents gaming. Participants cannot manipulate prices arbitrarily because the reference price is anchored to actual market conditions. The order book also provides feedback by showing aggregate demand and supply without revealing individual participant intentions, creating a self-regulating system that reduces gaming potential while maintaining liquidity efficiency.

The patent segments the trading system into distinct functional modules: an order reception component that collects dark orders, an order book management component that stores and organizes orders, a reference price calculation component that determines execution prices, and an order filling component that executes trades. This segmentation allows each module to perform its function independently and reliably, reducing overall system complexity while maintaining trading integrity. The modular structure also makes the system easier to audit and regulate, further supporting integrity without proportionally increasing complexity.