Hardware Message Filter for Wire-Speed Securities Order Validation
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Solution Overview
Problem
Current software-only systems for risk and compliance validation in securities transactions introduce latency issues, hindering high-speed transactions required by certain customer types, as they need to process entire messages before performing risk management checks.
Innovation Solution
A reprogrammable integrated circuit (IC) device with embedded hardware instructions that parses and evaluates incoming securities orders against pre-established criteria, allowing or truncating orders in real-time to ensure compliance, operating in cut-through or store-and-forward modes to minimize latency.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Reliability
If software-only systems are used for risk management validation, then comprehensive risk assessment can be performed, but message processing latency increases significantly
Solution Approach 1:
The system segments the order processing function into two parts: a hardware-based filter device that performs initial rapid filtering of orders based on pre-defined criteria, and a software-based risk management system that performs comprehensive validation only on orders that pass the hardware filter. This segmentation allows the majority of orders to be processed rapidly in hardware while maintaining thorough software-based validation for edge cases.
Solution Approach 2:
The hardware filter device performs preliminary filtering of orders before they reach the software risk management system. By evaluating orders against pre-defined criteria in hardware at wire speed, the system prepares and pre-screens orders in advance, allowing the software system to focus only on orders requiring detailed validation, thereby reducing overall latency.
2Speed
If hardware-based filtering is implemented, then message processing speed increases to wire-speed, but system complexity increases due to integration requirements
Solution Approach 1:
The hardware filter device acts as an intermediary component between the network interface and the software risk management system. It receives incoming orders, performs rapid hardware-based filtering, and forwards only relevant orders to the software system. This intermediary approach enables wire-speed processing while maintaining manageable system complexity through clear interface definitions and modular architecture.
Data Source
AI summary
An in-line hardware message filter device inspects incoming securities transactions. The invention is implemented as an integrated circuit (IC) device which contains computer code in the form of on-chip hardware instructions. Data messages comprising orders enter the device in exchange-specific formats. Messages that satisfy pre-determined risk assessment filters are allowed to pass through the device to the appropriate securities exchange for execution. The system functions as a passive device for all legitimate network traffic passing directly or indirectly between a customer's computer and a securities exchange's order-acceptance computer. Advantageously, the invention allows the broker-dealer to check and pass messages or orders as they come through the system without having to store the full message before making a risk assessment decision. The hardware-only nature of the invention serves to maximize the speed of order validation and to perform pre-trade checks in a cut-through or store-and-forward mode.