Fraction Share Trading Engine with Inventory Buffer
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Solution Overview
Problem
Current securities transaction systems lack client-friendly features for customizing and managing investment portfolios, fail to allow real-time transactions, and do not enable trading of fraction shares or reduce the frequency of orders sent to the market.
Innovation Solution
A system with a client interface, host server, inventory account, pricing engine, and trading engine that processes buy, sell, sell short, or buy to cover orders, enabling real-time trading of fraction shares and reducing market orders by executing principal trades against the inventory account.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Adaptability or versatility
If existing securities transaction systems are used, then investors can purchase individual securities or standardized portfolios, but the systems lack client-friendly features for customizing and managing investment portfolios
Solution Approach 1:
The system segments the investment portfolio into individual security positions that can be independently customized. Each security can be added, removed, or adjusted independently, allowing clients to build tailored portfolios rather than being limited to pre-packaged funds. The interface presents securities as discrete selectable items rather than monolithic portfolio units.
Solution Approach 2:
The system adds a customization dimension to portfolio management by introducing sliders and controls that allow continuous adjustment of individual security weights and portfolio composition. This transforms the traditional binary choice (buy/sell entire fund) into a multi-dimensional space where clients can independently adjust each holding's allocation.
2Speed
If real-time trading is implemented, then clients can conduct transactions immediately, but the frequency of orders sent to market increases
Solution Approach 1:
The system performs preliminary actions by pre-calculating order routing decisions and maintaining an inventory buffer of securities. When a client places a real-time order, the system has already prepared the infrastructure to execute it immediately, reducing the need for repeated market queries and orders. The inventory buffer allows immediate fulfillment without always requiring market purchases.
Solution Approach 2:
The system introduces an intermediary inventory buffer between the client and the market. Instead of directly routing every client order to the market, the inventory acts as a mediator that can satisfy orders from its holdings, reducing market order frequency while maintaining real-time execution capability for available securities.
3Ease of operation
If fraction shares are traded, then investment accessibility is improved, but the complexity of transaction processing increases
Solution Approach 1:
The system changes the parameter of share quantity from discrete whole units to continuous fractional values. This allows clients to invest any dollar amount and receive the corresponding fractional share count. The interface presents dollar amounts as the primary input rather than share counts, automatically calculating the fractional shares to be received based on current pricing.
4Adaptability or versatility
If clients can create customized portfolios, then investment flexibility is improved, but the difficulty of portfolio management increases
Solution Approach 1:
The system enables self-service portfolio management through an intuitive interface where clients can directly add, remove, and adjust security holdings using simple dollar amount inputs. The system automatically handles the complex calculations of fractional shares, pricing, and portfolio rebalancing, allowing clients to manage customized portfolios without needing to understand the underlying complexity.
Data Source
AI summary
A system and method for conducting security transactions provides a system with a client device with a client interface, an inventory account and a trading engine. The trading engine processes a client buy, sell, sell short or buy to cover order. The trading engine enables a trading of fraction shares in real time as well as reduces a frequency of orders sent to market by executing principal trades against the inventory account.