Selective Suppression of Implied Orders in Trading Systems
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Solution Overview
Problem
Conventional electronic trading systems face limitations in calculating and listing all possible or best possible implied markets due to computing capacity and speed constraints, especially when dealing with complex order combinations, leading to inefficiencies in determining and managing implied orders.
Innovation Solution
The system selectively generates and lists implied orders only when necessary, using a distributed computing architecture and match engine components to suppress unnecessary calculations and listings, particularly in highly liquid markets where implied orders do not significantly improve liquidity, thereby reducing computational load and message traffic.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Quantity of substance
If the system calculates and lists all possible implied orders to increase market liquidity, then market liquidity improves, but computing capacity and speed become insufficient
Solution Approach 1:
The patent extracts and removes unnecessary implied orders from the calculation set by identifying liquid markets where implied orders would not significantly improve liquidity. The match engine selectively suppresses calculation and listing of implied orders in these markets, taking out the harmful computational burden while preserving the beneficial liquidity-enhancing implied orders in illiquid markets.
Solution Approach 2:
Instead of calculating all possible implied orders (excessive action), the system performs partial calculation only for markets where implied orders are likely to be beneficial. The match engine uses heuristics to identify liquid markets and suppresses implied order generation in those cases, performing the full calculation only where needed.
2Measurement precision
If the system calculates complex order combinations to improve implied order accuracy, then implied order quality improves, but computational load increases
Solution Approach 1:
The patent applies different calculation depths to different markets based on their liquidity characteristics. For liquid markets, the system uses shallow or suppressed calculation (low local quality requirement). For illiquid markets, the system performs deep comprehensive calculation (high local quality requirement). This local differentiation optimizes the balance between accuracy and computational load.
3Productivity
If the system lists all implied orders to enhance trading opportunities, then trading volume increases, but message traffic increases
Solution Approach 1:
The system extracts and removes unnecessary implied orders from the order book in liquid markets, thereby reducing the volume of market data messages that need to be transmitted to traders. This selective suppression reduces message traffic while preserving implied orders in markets where they add trading value.
Data Source
AI summary
An electronic trading system utilizes a Match Engine that receives orders, stores them internally, calculates tradable combinations and advertises the availability of real and implied orders in the form of market data. New tradable items defined as combinations of other tradable items may be included in the calculation of tradable combinations. A technique is disclosed for suppression of the calculation and/or subsequent listing of an implied order when the order is either undesired or unnecessary in the market therefore.