Directed Order Processing for Automated Market Systems
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Solution Overview
Problem
Financial trading systems lack the ability to allow quoting market participants to choose how directed orders are treated as liability or non-liability, limiting flexibility in order processing and execution.
Innovation Solution
An electronic market system that enables clients to enter directed orders, which are then delivered as liability or non-liability orders based on the chosen preference of the quoting market participant, allowing for customized order routing and execution arrangements.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Reliability
If directed orders are delivered as liability orders to ensure execution, then execution reliability is improved, but flexibility in order processing deteriorates
Solution Approach 1:
The system dynamically adapts the order delivery mechanism by allowing quoting market participants to select between liability and non-liability order modes. This dynamic configuration enables the system to switch between execution reliability (liability orders) and processing flexibility (non-liability orders) based on participant preferences and market conditions, resolving the contradiction between these two opposing requirements.
Solution Approach 2:
The invention changes the parameter of order liability status from a fixed system-level setting to a variable participant-level choice. By allowing market participants to adjust this parameter according to their specific needs, the system simultaneously achieves execution reliability when needed and processing flexibility when needed, eliminating the trade-off between these two characteristics.
2Adaptability or versatility
If directed orders are delivered as non-liability orders to increase flexibility, then adaptability is improved, but execution reliability deteriorates
Solution Approach 1:
The system enables dynamic switching between non-liability and liability order delivery based on participant selection. When flexibility is prioritized, non-liability orders are used; when execution reliability is prioritized, liability orders are used. This dynamic adaptability resolves the contradiction by allowing both modes to coexist under different conditions.
Solution Approach 2:
The liability status parameter is transformed from a fixed state to a configurable option. Participants can change this parameter based on their specific trading needs, enabling the system to provide both high flexibility (non-liability) and high reliability (liability) depending on the configuration, thus eliminating the inherent trade-off.
3Adaptability or versatility
If the system provides choice of liability or non-liability order delivery, then adaptability is improved, but device complexity increases
Solution Approach 1:
The system implements self-service by allowing quoting market participants to automatically configure their own order delivery preferences (liability or non-liability) based on their specific needs. This self-configuration mechanism reduces the need for complex centralized control logic, as each participant manages their own settings, thereby increasing adaptability while minimizing the added system complexity.
Solution Approach 2:
The order delivery system is designed with multi-functionality to handle both liability and non-liability orders through a unified framework. By creating a universal processing mechanism that can accommodate both order types based on participant selection, the system achieves high adaptability without proportionally increasing complexity, as the same infrastructure serves multiple functions.
Data Source
AI summary
An electronic market for trading of securities includes a plurality of client stations for entering quotes for securities and a server process that receives quotes from the clients, aggregates the quotes and causes a total of all aggregated quotes to be displayed for a plurality of price levels on the client systems. The market uses a graphical user that depicts aggregated quotes in an aggregate window a plurality of price levels of a product traded in the market. The market also includes processes to handle lock/cross market conditions, match-off of order flow and provides a central quote/order collector that interfaces to disparate order delivery systems to minimize dual liability of market makers.