Exchange Gateway Message Prioritization Under Transaction Limits
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Solution Overview
Problem
Electronic trading systems often impose transaction limits on the number of messages that can be communicated to an exchange without informing participants, leading to rejected high-priority trade messages due to unawareness of these limits, resulting in adverse effects.
Innovation Solution
Implementing a method to calculate an artificial transaction limit based on the exchange's limit, reserving capacity for high-priority messages by monitoring throughput and latency, and delaying or canceling lower-priority messages to ensure high-priority messages are executed.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Reliability
If transaction limits are imposed on the number of messages communicated to the exchange, then the exchange can manage message throughput and prevent system overload, but high-priority trade messages may be rejected when the limit is reached
Solution Approach 1:
The patent segments messages into different priority levels (first priority and second priority). The transaction limit is applied differently to each segment: first priority messages are exempt from the limit while second priority messages are subject to it. This segmentation allows critical messages to always be executed while still managing overall throughput for non-critical messages.
Solution Approach 2:
The patent applies different quality standards (priority treatments) to different parts of the message stream. First priority messages receive preferential treatment with no transaction limit applied, while second priority messages receive standard treatment with the transaction limit applied. This local differentiation ensures that message handling quality varies by priority level.
2Adaptability or versatility
If the exchange does not provide transaction limit information to participants, then the exchange can maintain operational flexibility and prevent limit circumvention, but participants cannot optimize their message sending strategies
Solution Approach 1:
The gateway acts as an intermediary between participants and the exchange. It implements the priority-based transaction limit logic locally without requiring the exchange to disclose its internal limits. The gateway autonomously determines which messages are first priority (exempt from limits) and which are second priority (subject to limits), maintaining exchange flexibility while enabling participant optimization.
3Ease of operation
If all trade messages are treated equally regarding transaction limits, then the system is simple to operate, but critical messages may be rejected along with non-critical messages
Solution Approach 1:
The gateway performs preliminary classification of messages into priority levels before they are subject to transaction limit enforcement. By pre-identifying first priority messages and marking them for exemption, the system ensures critical messages are protected from rejection while maintaining simple limit enforcement logic for second priority messages.
Data Source
AI summary
Methods and systems to prevent adverse exchange limit effects are disclosed. An example method of message management includes tracking, at a gateway, a transaction count of trade messages communicated to an exchange via an exchange link. The example method includes defining a first transaction limit based on the transaction count, and calculating a second transaction limit as a function of the first transaction limit, wherein the second transaction limit is to correspond to a reserve capacity associated with the exchange link. The example method includes assigning a message priority to each of a plurality of trade messages to communicate to the exchange. The example method includes communicating trade messages of the plurality of trade messages having a first message priority to the exchange when the transaction count is greater than the second transaction limit, and delaying or rejecting trade messages of the plurality of trade messages having a second message priority.