Dynamic Order Routing Engine for Fee Optimization

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Solution Overview

Problem

Market volatility can cause orders initially perceived as non-marketable to become marketable during routing, leading to unintended fee incurrence instead of rebate generation in electronic exchange platforms.

Innovation Solution

An order routing system that detects changes in order marketability and reroutes marketable orders to destinations offering rebates, while non-marketable orders are posted to exchange order books, thereby optimizing fee structures and liquidity provision.

Engineering Contradictions & Design Principles

VSEngineering Contradiction Analysis

1Speed

If orders are routed based on initial marketability assessment, then routing speed is improved, but fee optimization deteriorates due to market volatility causing non-marketable orders to become marketable during routing

Engineering Contradiction:

Improverouting speedVSAvoidfee optimization

Core Design Contradiction:

SpeedVSLoss of energy

Solution Approach 1:

The system performs preliminary marketability assessment of orders before routing, but also implements continuous monitoring during the routing process. When market conditions change and a non-marketable order becomes marketable, the system detects this change and reroutes the order to appropriate destinations, thus optimizing fees while maintaining routing efficiency

Inventive Principle:

Principle #10Preliminary action

Solution Approach 2:

The system implements a feedback mechanism that continuously monitors market conditions and order status during the routing process. Real-time feedback from market data feeds allows the system to detect when orders change from non-marketable to marketable status, enabling dynamic route adjustment to capture rebates and avoid fees

Inventive Principle:

Principle #23Feedback

2Loss of energy

If real-time market monitoring is implemented to detect order marketability changes, then fee optimization is improved, but system complexity increases

Engineering Contradiction:

Improvefee optimizationVSAvoidsystem complexity

Core Design Contradiction:

Loss of energyVSDevice complexity

Solution Approach 1:

The order routing system performs multiple functions: initial order assessment, continuous market monitoring, real-time marketability determination, and dynamic routing. By consolidating these functions into a single multi-functional system rather than separate specialized systems, the patent reduces overall system complexity while achieving real-time fee optimization

Inventive Principle:

Principle #6Universality (Multi-functionality)

Solution Approach 2:

The system uses publicly available market data feeds and order book information to autonomously determine order marketability and make routing decisions without requiring complex external validation systems or manual intervention, thereby reducing system complexity while maintaining real-time optimization capability

Inventive Principle:

Principle #25Self-service

3Loss of energy

If marketable orders are rerouted to wholesale destinations, then rebate generation is improved, but order book liquidity may deteriorate

Engineering Contradiction:

Improverebate generationVSAvoidorder book liquidity

Core Design Contradiction:

Loss of energyVSQuantity of substance

Solution Approach 1:

The system applies different routing strategies based on local characteristics of each order: non-marketable orders are routed to exchange order books to provide liquidity, while marketable orders are routed to wholesale destinations to capture rebates. This localized quality approach ensures that each order is routed to the destination that maximizes its specific value contribution

Inventive Principle:

Principle #3Local quality

Solution Approach 2:

The system dynamically changes routing parameters based on real-time market conditions and order characteristics. By continuously assessing marketability and adjusting routing decisions accordingly, the system optimizes the balance between rebate generation from marketable orders and liquidity provision from non-marketable orders, preventing deterioration of overall order book liquidity

Inventive Principle:

Principle #35Parameter changes

Data Source

PatentUS10198768B2Order message flow routing engine and method

Publication Date: 2019.02.05 NASDAQ INC

AI summary

A routing device for routing an electronic order data message is provided. A storage medium stores a routing table and a transceiver communicates with a first set of computing nodes, a first electronic trading platform, and a second set of electronic trading platforms. An electronic order data message and an updated financial data message feed are accepted at the routing device. The marketable or non-marketable operation state of the electronic order data message is determined from the updated financial data message feed. The electronic order data message is then routed based on a selected routing strategy and a selected destination address. A non-marketable operation state routes the electronic order data message to the first electronic trading platform. A marketable operation state routes the electronic order data message to at least one of the second set of electronic trading platforms.