Exchange Liquidity Index Engine for Real-Time Options Data
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Solution Overview
Problem
Existing stock market exchanges lack a standardized, real-time measure of market liquidity, making it difficult for market participants to accurately assess and manage trading risks and execute strategies effectively.
Innovation Solution
An exchange computer system generates and disseminates an implied liquidity index based on vast amounts of market data, providing a standardized, real-time measure of market liquidity, allowing market participants to make informed decisions and execute complex trading strategies.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Measurement precision
If market participants manually analyze vast amounts of options data to assess market liquidity, then they can obtain liquidity information, but the process requires substantial time and computational resources
Solution Approach 1:
The patent introduces an exchange computer system as an intermediary that automatically processes options data and generates liquidity index values. This mediator translates raw market data into actionable intelligence, eliminating the need for individual participants to manually analyze vast amounts of data while providing precise liquidity measurements in real-time
Solution Approach 2:
The exchange computer system performs self-service by automatically monitoring market conditions, processing options data, and generating liquidity index values without human intervention. The system continuously updates and disseminates these values to connected computing devices, enabling market participants to access processed information without investing their own computational resources
2Loss of information
If the exchange computer system processes and disseminates liquidity index values to multiple users, then information availability improves, but bandwidth and computing resources are consumed
Solution Approach 1:
The exchange computer system creates and disseminates copies of the liquidity index values to multiple connected computing devices simultaneously. Rather than requiring each participant to access and process the same raw data independently, the system generates single authoritative copies of processed intelligence and distributes them efficiently across the network
Solution Approach 2:
The exchange computer system performs preliminary processing of options data before dissemination, pre-calculating liquidity index values and preparing them for distribution. This advance processing eliminates the need for redundant computation at each receiving endpoint, significantly reducing overall bandwidth and computing resource consumption across the network
Data Source
AI summary
An exchange computer system, a method, and non-transitory computer-readable storage media for generating an implied liquidity index and values. The exchange computer system receives data related to a plurality of stocks, data related to a stock market index, and data related to a plurality of stock options. The exchange computer system selects a plurality of component stock options, determines a quantity of available stock option contracts for each of the stock options in the plurality of component stocks options, applies one or more of (i) a price normalization, (ii) a relative bid-ask spread normalization, or (iii) an expiry normalization. The exchange computer system determines an option contract multiplier and generates, for a particular period of time, an implied liquidity index value based the option contract multiplier and the applied normalization and transmits the implied liquidity index value to a device connected to the exchange computer system.