Automated Execution System Participant Order Flow Routing
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Solution Overview
Problem
Current electronic trading systems do not allow participants to participate in trades resulting from their own generated order flow, limiting their involvement in the trading process.
Innovation Solution
An automated execution system that enables participants to participate in a stated percentage of their generated order flow without affecting the execution price, by routing orders through a firm participation subsystem and a market maker subsystem, ensuring executions at the National Best Bid or Offer.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Productivity
If participants submit orders to an automated execution system, then order execution efficiency is improved, but participants cannot participate in trades from their own order flow
Solution Approach 1:
The order execution system is segmented into multiple components: an automated execution system that handles order routing and matching, and a separate participant participation mechanism that allows participants to opt-in for specific order flow. This segmentation enables the system to maintain automated efficiency while providing a pathway for participant involvement in trades from their own order flow.
Solution Approach 2:
The system dynamically adjusts participation levels based on participant preferences and market conditions. Participants can selectively choose to participate in trades from their own order flow on a per-order or per-asset basis, allowing the system to adapt between fully automated execution and participant-involved execution depending on specific trading scenarios.
2Adaptability or versatility
If participants are allowed to participate in their own order flow, then participant engagement is improved, but execution price fairness may be compromised
Solution Approach 1:
The automated execution system acts as an intermediary between participants and the order flow marketplace. Even when participants choose to participate in trades from their own order flow, the automated system intermediates the process by ensuring that executions occur at the National Best Bid or Offer (NBBO), thereby maintaining price fairness while enabling participant engagement.
Solution Approach 2:
The system incorporates feedback mechanisms that monitor execution prices and participant participation levels. This feedback ensures that when participants engage in their own order flow, the executions still achieve the best available prices, maintaining fairness while allowing engagement.
3Speed
If automated execution system is implemented, then trading speed is improved, but participant control over order flow is reduced
Solution Approach 1:
The system provides dynamic control options where participants can adjust their level of involvement in real-time. Participants can choose to have full automated execution, selective participation in specific orders, or opt-in participation for their own order flow, allowing them to maintain control while benefiting from automated execution speed where appropriate.
Solution Approach 2:
The automated execution system is designed with multi-functionality, serving both as a high-speed automated execution platform and as a participant engagement platform. This universal design allows the same system to provide both automated speed and participant control depending on how participants configure their trading preferences.
Data Source
AI summary
A method and system is provided for allowing a participant that generates order flow to participate in automated execution trades that are generated by the participant's order flow, without affecting the price of execution to the retail customer. The method and system automatically assigns a stated percentage of the contra-side of each customer trade to the participant that sent in the order flow.