Distributed Trading Network for Private, Targeted Order Matching
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Solution Overview
Problem
Existing trading systems face inefficiencies in matching orders due to fear of signaling and market impact costs, leading to suboptimal distribution of liquidity and increased interface clutter.
Innovation Solution
A distributed trading platform that interacts with order management systems to generate conditional orders based on aggression levels and market data, allowing liquidity providers to set premiums, and securely matches these orders with liquidity takers while maintaining trading intentions private.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Productivity
If traditional trading systems display all orders to liquidity takers, then order matching opportunities increase, but interface clutter increases and usability decreases
Solution Approach 1:
The system displays different order information to different liquidity takers based on their specific characteristics. Each liquidity taker receives a customized view of orders that is relevant to their trading needs, rather than a uniform display of all orders. This localizes the information quality to match the specific requirements of each participant.
Solution Approach 2:
The order book is segmented and distributed to multiple liquidity takers based on their individual characteristics and trading needs. Instead of a single centralized order display, the system divides order information into segments that are selectively shared with appropriate liquidity takers, reducing interface clutter while maintaining matching opportunities.
2Measurement precision
If liquidity takers view all order details, then matching accuracy improves, but information leakage increases and market impact costs rise
Solution Approach 1:
The system provides differentiated information quality to different liquidity takers. Each liquidity taker receives order details tailored to their specific characteristics and trading strategy, allowing accurate matching for their purpose while preventing disclosure of information that would cause market impact or leakage to inappropriate parties.
Solution Approach 2:
The system acts as an intermediary between order generators and liquidity takers. It selectively filters and transmits order information based on liquidity taker characteristics, serving as a gatekeeper that enables accurate matching while preventing direct information leakage and market impact.
3Productivity
If the system generates multiple conditional orders from a single order, then liquidity distribution improves, but system complexity increases
Solution Approach 1:
A single order is automatically segmented into multiple conditional orders with different characteristics (prices, quantities, expiration times). These segmented orders are then distributed to appropriate liquidity takers based on their characteristics, improving liquidity distribution while the system manages the complexity through automated processing.
Solution Approach 2:
The system transforms a single order into multiple conditional orders by changing parameters such as price, quantity, and expiration time. This parameter transformation enables better liquidity distribution across different liquidity takers while the system handles the complexity through standardized parameter modification processes.
Data Source
AI summary
A distributed trading platform comprising: a first participant system of a liquidity provider configured to determine a first order that is stored in a first order management system; a central system configured to determine a plurality of second orders based on the first order, an aggression level and market data; and a second participant system of a liquidity taker configured to determine that a contra order is stored in a second order management system, determine a single second order of the plurality of second orders that the liquidity taker is qualified to view based on a third quantity of the contra order, and populate a second trader interface with information soliciting submission of the contra order to the distributed trading platform for matching with the single second order.