Exchange Message Weighting Policy for Excessive Order Traffic
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Solution Overview
Problem
Inefficient and excessive messaging in financial exchange trading systems can lead to improper price shifting and increased bandwidth requirements, compromising market liquidity.
Innovation Solution
A mechanism that evaluates message content by grading and applying a weighting factor, determining a weighted message count, and initiating actions if thresholds are met, such as financial penalties or suspending messaging privileges, to discourage excessive messaging while encouraging preferred content.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Quantity of substance
If the exchange trading system accepts all messages to maintain market liquidity, then market liquidity is maintained or increased, but the system performance slows down and bandwidth requirements increase
Solution Approach 1:
The patent applies local quality by differentiating message evaluation based on content characteristics. Different message types (e.g., bids, offers, cancellations) receive different weighting factors based on their informational value and impact on market liquidity. This selective evaluation approach maintains system performance while preserving market liquidity by focusing processing resources on high-value messages.
Solution Approach 2:
The patent changes the parameter of message evaluation from binary (accepted/rejected) to continuous (weighted scoring). By assigning weighting factors based on message content analysis, the system can differentiate between high-quality and low-quality messages, allowing performance optimization without completely rejecting messages that contribute to market liquidity.
2Quantity of substance
If the exchange trading system accepts excessive messages, then market liquidity is maintained, but improper price shifting occurs and operational costs increase
Solution Approach 1:
The patent implements feedback by continuously monitoring message content characteristics and adjusting weighting factors accordingly. The system analyzes message patterns, identifies potentially manipulative behavior, and applies appropriate weighting to discourage excessive or improper messaging while maintaining legitimate market-making activity.
Solution Approach 2:
The patent introduces an intermediary message evaluation mechanism that acts as a mediator between message submission and order book updating. This intermediary layer analyzes message content, applies weighting factors, and filters out messages that could cause improper price shifting before they impact market prices.
3Device complexity
If the exchange trading system processes all messages equally, then simplicity is maintained, but inefficient messaging slows down system performance
Solution Approach 1:
The patent applies segmentation by dividing message processing into distinct evaluation stages: initial filtering, content analysis, weighting factor application, and final acceptance/rejection determination. This segmented approach improves system performance by processing messages in manageable stages rather than as a monolithic operation.
Solution Approach 2:
The patent implements preliminary action by performing message content analysis and weighting factor assignment before messages are added to the order book. This preliminary evaluation prevents low-value or harmful messages from consuming system resources, thereby improving overall performance without adding significant processing complexity.
Data Source
AI summary
Systems for and methods of evaluating messaging, comprising, receiving, via at least one server device, one or more messages, and said at least one server device processing at least one of the one or more messages by grading content included in said at least one message, applying a weighting factor to said at least one message according to said grading, thereby determining a weighted message count for said at least one message, aggregating the weighted message count for said at least one message, and initiating an action if the aggregated weighted message count meets or exceeds a predetermined count threshold.