Fair Exchange System Using Synchronized Clocks
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Solution Overview
Problem
Electronic trading platforms face inequities due to varying network access speeds and latencies, leading to unfair advantages and disadvantages among traders, which can deter participation and hinder competition.
Innovation Solution
Implementing a 'fair exchange' system with synchronized clocks at local communication servers and the host system, ensuring data is sent and received simultaneously across all client devices, and prioritizing transactions based on their origin time to level the playing field.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Speed
If traders use faster network connections to access market data and send orders, then their trading speed and competitiveness improve, but this creates unfair advantages for some participants over others
Solution Approach 1:
The system performs preliminary actions by synchronizing clocks at the host system and local communication servers before trading occurs. Time stamps are assigned to orders at the source (client device) using synchronized clocks, ensuring that all participants start with equal timing accuracy. This preliminary synchronization prevents timing-based unfairness from manifesting during actual trading operations.
Solution Approach 2:
The patent introduces synchronized clocks as an intermediary mechanism between the host system and client devices. These clocks act as neutral mediators that provide a common time reference for all participants, regardless of their network connection quality. The synchronized clocks mediate the timing of order submission and market data reception, ensuring fairness without requiring all participants to have identical network infrastructure.
2Reliability
If the host system sends market data to all client devices simultaneously, then all traders receive information at the same time, but network latency causes actual receipt times to differ among participants
Solution Approach 1:
The patent applies local quality by placing synchronized clocks at both the host system and local communication servers. Each location has its own time-synchronization mechanism tailored to its specific network conditions. The system recognizes that different locations have different network latencies and uses locally-synchronized clocks to compensate, rather than attempting to enforce a single universal timing mechanism that would not account for local variations.
Solution Approach 2:
The system performs preliminary clock synchronization at both the host and local server levels before market data transmission occurs. This preliminary action ensures that even though network latency will cause data to arrive at different times, the timing references themselves are synchronized, allowing the system to accurately track and compensate for transmission delays.
3Ease of operation
If orders are prioritized based on first-in-first-out (FIFO) basis, then processing is simple and fair, but network latency causes later-sent orders to be processed before earlier-sent orders
Solution Approach 1:
The system performs preliminary time-stamping of orders at the client device using synchronized clocks before the orders are transmitted over the network. This preliminary action captures the true submission time of each order at its source, independent of network conditions. When orders arrive at the host system, they can be processed using simple FIFO logic while the pre-assigned time stamps ensure that chronological order is preserved despite varying transmission times.
Solution Approach 2:
The patent creates a copy of the order submission time at the client device and transmits this time information along with the order to the host system. This time stamp copy serves as immutable evidence of when the order was originally submitted, allowing the host system to verify chronological order without needing to trust network transmission timing. The copy mechanism preserves the original submission sequence independent of network latency.
Data Source
AI summary
A fair exchange is disclosed to reduce potential inequities in an electronic trading environment. Market data is sent from a host system to client devices through one or more synchronized local communication servers such that the data can be displayed simultaneously or nearly simultaneously at each client device. Market data sent to client devices might include price information. Likewise, a host system may transaction data sent from client devices via the local communication servers. The ordering of transaction data is based, at least in part, on when the local communication servers received the transaction data from the client devices. Transaction data sent to a host system might include order information.