Fee Rebate Contingent Order Matching System
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Solution Overview
Problem
Current order matching algorithms in Order Matching Entities (OMEs) face challenges in efficiently handling orders with fee/rebate contingencies, leading to order rejections, increased message traffic, and the risk of 'deadly embrace' scenarios.
Innovation Solution
The Contingent Order Matching System (COMS) allows OMEs to accept orders with optional fee/rebate contingency rates, enabling the system to temporarily yield priority to unmatchable orders and avoid deadly embrace, while also reducing the need for multiple exchanges and order rejections.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Productivity
If current order matching algorithms are used to handle orders with fee/rebate contingencies, then order matching can be performed, but order rejections increase and operational efficiency decreases
Solution Approach 1:
The patent changes the parameter of order priority determination from static to dynamic based on fee/rebate contingency status. Unmatchable orders with fee/rebate contingencies are temporarily yielded priority to, allowing the system to accept these orders without immediate rejection, thereby improving order acceptance rate while maintaining matching efficiency through subsequent re-evaluation when market conditions change.
Solution Approach 2:
The system implements dynamic priority adjustment where order priority is not fixed but changes based on matching status and fee/rebate contingencies. This allows the matching system to adapt to changing market conditions, temporarily yielding to unmatchable orders and then re-evaluating them when new matching opportunities arise, improving both reliability and productivity.
2Reliability
If orders are rejected when fee/rebate contingencies prevent matching, then deadly embrace scenarios are avoided, but message traffic increases and operational costs rise
Solution Approach 1:
The patent converts the potentially harmful situation of unmatchable orders with fee/rebate contingencies into a beneficial outcome by temporarily yielding them priority. This prevents deadly embrace scenarios while keeping orders in the system for potential future matching, transforming what would be rejected orders into maintainable order states that reduce message traffic and operational costs.
Solution Approach 2:
The system performs preliminary action by temporarily yielding priority to unmatchable orders with fee/rebate contingencies before deadly embrace can occur. This preventive measure maintains system stability while avoiding the need for immediate rejection and subsequent re-submission, thereby reducing message traffic volume and associated operational costs.
3Adaptability or versatility
If multiple exchanges are established to handle different fee/rebate contingency scenarios, then order matching flexibility increases, but system complexity and costs increase
Solution Approach 1:
The patent makes the single order matching system universal by enabling it to handle diverse fee/rebate contingency scenarios through dynamic priority adjustment. Instead of requiring multiple specialized exchanges, one matching system can adapt to various contingency types by temporarily yielding priority to unmatchable orders, thereby reducing system complexity while maintaining high adaptability and versatility.
Solution Approach 2:
The patent merges the functionality of multiple potential exchanges into a single order matching system. By combining the ability to handle different fee/rebate contingency scenarios within one system through dynamic priority management, it eliminates the need for multiple separate exchanges, reducing overall system complexity while preserving comprehensive adaptability.
4Manufacturing precision
If the resting order book is kept locked or crossed to maintain fee/rebate contingencies, then order matching precision improves, but the risk of deadly embrace increases
Solution Approach 1:
The patent applies preliminary anti-action by temporarily yielding priority to unmatchable orders with fee/rebate contingencies before deadly embrace can develop. This preventive priority adjustment maintains the locked or crossed state for precision matching while actively preventing the harmful deadly embrace scenario from occurring, thereby preserving matching precision without the associated risk.
Data Source
AI summary
A specialized computer matching system programmed to match orders for financial instruments of any type; where orders are matched at a price equal to the best available price or within the best available prices in the market; where priority of matching orders is ranked by price; where orders at the same price may be further ranked based on other attributes; where orders may optionally specify that the order sender is willing to pay a fee to (or receive a rebate by) an Order Matching Entity (i.e., a fee/rebate contingency (FRC)); where an order's optional FRC must be met in order to match the order; and where an order which cannot be matched solely because its FRC rate prevents it from matching with another order temporarily yields priority—other than price priority—to other orders ranked below to permit those orders to be matched.