Exchange Network Access Control for Conditional Order Fairness
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Solution Overview
Problem
Existing electronic exchange networks struggle to provide fair and efficient access control for both human and non-human participants, leading to unequal participation and potential abuse, particularly during unforeseen market events.
Innovation Solution
Implementing a system that allows human and non-human traders to seamlessly co-exist by using synchronized communication and differentiated time-out values for conditional orders, along with compliance mechanisms to prevent abuse and ensure atomic execution of transactions.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Adaptability or versatility
If the exchange network allows both human and non-human participants to access conditional orders, then participation and liquidity are enhanced, but system fairness and stability deteriorate due to unequal responsiveness and potential abuse
Solution Approach 1:
The patent applies local quality by implementing participant-type-specific timeout values tailored to different responsiveness characteristics. Human traders are assigned longer timeout periods (e.g., 30 seconds) while algorithm traders receive shorter periods (e.g., 1 second), creating localized access control rules that match each participant class's operational characteristics and prevent systematic unfairness.
Solution Approach 2:
The system dynamically adjusts timeout values based on participant type and market conditions. The timeout mechanism is not static but adapts to the specific trader category (human vs. algorithm) and can be modified in response to market state, allowing the system to maintain fairness while accommodating diverse trading styles and speeds.
2Reliability
If synchronized communication with waiting for responses is implemented, then atomic execution and fairness are preserved, but transaction speed and productivity decrease
Solution Approach 1:
The system performs preliminary actions by pre-establishing timeout values and synchronization protocols before transactions occur. Conditional orders are prepared with predetermined timeout parameters, and the synchronized communication framework is configured in advance, allowing atomic execution to be achieved without ad-hoc delays during critical transaction moments.
Solution Approach 2:
The patent changes the timeout parameter dynamically based on participant type to optimize the balance between atomic execution reliability and transaction speed. By adjusting this critical time parameter, the system maintains data integrity through synchronized communication while minimizing unnecessary delays for different trader categories.
3Reliability
If differentiated timeout values are used for human and algorithm traders, then system-level fairness is achieved, but communication complexity increases
Solution Approach 1:
The patent segments the trader population into distinct categories (human traders and algorithm traders) with different timeout characteristics. This segmentation allows the system to apply simplified, category-specific rules rather than complex individualized configurations, reducing overall communication complexity while maintaining fairness through targeted differentiation.
Solution Approach 2:
The system uses parameter changes by modifying timeout values based on participant type identification. Rather than implementing complex communication protocols, the system simply adjusts the timeout parameter according to whether the trader is human or algorithmic, achieving system-level fairness through a single configurable parameter change.
4Ease of operation
If conditional orders are allowed to sit uncommitted, then human traders have time to respond, but information leakage risk and potential abuse increase
Solution Approach 1:
The system takes preliminary action by establishing predetermined timeout thresholds and compliance monitoring rules before conditional orders are placed. These pre-configured parameters automatically expire uncommitted orders after specified periods, preventing indefinite exposure of conditional pricing information while giving traders adequate response time.
Solution Approach 2:
The patent implements feedback mechanisms through compliance monitoring that tracks conditional order behavior and provides feedback to the system. When patterns suggesting potential abuse or information leakage are detected, the system can adjust timeout values or reject orders, creating a closed-loop control that balances trader responsiveness with information protection.
Data Source
AI summary
Implementations provide an exchange computer system including at least one communication interface connecting a plurality of remote computing devices with the exchange computer system; a matching engine comprising at least one hardware processor configured to perform operations of: receiving, from a remote computing device, data encoding a first conditional transaction request; identifying a second transaction request that is a likely match for the first conditional transaction request when the first conditional transaction request is at least partially met by the second transaction request; transmitting, to the remote computing device, data encoding an invitation for the submitting user to firm up the first conditional transaction request; and responsive to receiving a reply indicating that the submitting user firms up the first conditional transaction request, executing the first conditional transaction request and the second transaction request such that the exchange computer allows the submitting user to conduct exchanges with algorithm-driven agents.