Dynamic Workup Termination for Trading Systems
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Solution Overview
Problem
The existing double public workup protocol in trading systems is not capable of reacting rapidly enough to meet the demands of algorithmic traders, leading to delayed trades and lost potential revenue, as it requires traders to wait for a fixed period before submitting orders at a different price even when there is no further interest at the workup price.
Innovation Solution
A system and method that allow orders specifying a better price to terminate the existing workup and initiate a new one, enabling faster transactions by setting a threshold for passive and aggressive orders, ensuring that a new workup starts when sufficient volume at the better price is available, allowing trades to be executed at that price.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Reliability
If the existing double public workup protocol is used, then market liquidity is maintained through fixed workup periods, but system responsiveness and trading speed are reduced due to mandatory waiting periods
Solution Approach 1:
The system transitions from static fixed workup periods to dynamic workup termination. The workup period becomes flexible, allowing early termination when aggressive orders meet threshold criteria, thereby adapting to real-time market conditions and improving responsiveness while preserving liquidity mechanisms.
Solution Approach 2:
The workup protocol parameters are changed from fixed time-based termination to conditional termination based on order volume thresholds. This parameter change enables the system to respond faster to genuine trading interest while maintaining the structural integrity needed for market liquidity.
2Stability of the object's composition
If traders must wait for fixed workup periods, then orderly price discovery is maintained, but trading opportunities are lost and revenue is reduced due to delayed execution
Solution Approach 1:
The price discovery process becomes dynamic rather than static. Instead of waiting for fixed periods, the system continuously monitors for threshold-met aggressive orders and terminates workups promptly when criteria are satisfied, enabling faster price discovery while maintaining orderliness through structured threshold requirements.
Solution Approach 2:
The system implements feedback mechanisms by continuously monitoring aggressive order volumes during workup periods. When thresholds are met, this feedback triggers immediate workup termination and trade execution, creating a responsive loop that balances orderly discovery with trading speed.
3Ease of operation
If the workup protocol requires fixed waiting periods, then all traders are treated equally, but algorithmic traders suffer competitive disadvantage due to inability to react rapidly to market changes
Solution Approach 1:
The system provides dynamic responsiveness that benefits algorithmic traders while preserving fairness. All traders operate under the same threshold-based termination rules, but the system's ability to quickly recognize and act on qualifying orders enables faster execution for all participants, particularly those using automated strategies.
Solution Approach 2:
The mechanical fixed-time waiting system is replaced with an automated threshold-detection system. This substitution enables rapid, rule-based termination when criteria are met, providing competitive advantage to algorithmic traders through speed while maintaining fairness through consistent application of objective thresholds.
Data Source
AI summary
A trading system matches a passive order to buy or sell an item at a price with an aggressive order to hit or lift the item at that price. A workup is initiated during which other parties can submit additional orders at the passive order price. A further order may be submitted during workup with a better price. If the amount at the better price equals or exceeds a threshold value and it can be traded at the better price, the workup is terminated and a new workup initiated at the better price.