Latency-Aware Order Routing for Synchronized Trade Execution

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Solution Overview

Problem

Existing networked data processing systems face challenges in coordinating the execution of multiple related processes across distributed resources, leading to increased trading costs due to latency differences between processors, which allows for arbitrage opportunities and reduces overall fill ratios.

Innovation Solution

A system and method for coordinating data processing by dividing processes into segments and determining timing parameters based on execution latencies across multiple networked computing resources, ensuring synchronized execution and adjusting these parameters to optimize capture ratios.

Engineering Contradictions & Design Principles

VSEngineering Contradiction Analysis

1Adaptability or versatility

If orders are routed to multiple exchanges simultaneously, then liquidity coverage is improved, but latency differences cause arbitrage opportunities and reduce fill ratios

Engineering Contradiction:

Improveliquidity coverageVSAvoidfill ratio

Core Design Contradiction:

Adaptability or versatilityVSReliability

Solution Approach 1:

The system performs preliminary actions by determining execution latencies for each exchange beforehand and using these latency values to calculate timing parameters. This allows the system to anticipate and compensate for latency differences, ensuring simultaneous execution across multiple exchanges and preventing arbitrage opportunities that would otherwise reduce fill ratios.

Inventive Principle:

Principle #10Preliminary action

Solution Approach 2:

The system changes the timing parameters of order transmission to each exchange based on their respective execution latencies. By adjusting transmission timing parameters dynamically according to measured latency values, the system achieves synchronized execution across exchanges with different speeds, thereby maintaining high fill ratios while routing to multiple liquidity sources.

Inventive Principle:

Principle #35Parameter changes

2Reliability

If timing parameters are adjusted to synchronize execution, then fill ratios are improved, but system complexity increases

Engineering Contradiction:

Improvefill ratioVSAvoidcoordination complexity

Core Design Contradiction:

ReliabilityVSDevice complexity

Solution Approach 1:

The system performs self-service by automatically measuring execution latencies and calculating appropriate timing parameters without requiring manual intervention or complex external coordination. The latency measurement and timing adjustment processes are self-contained within the order routing system, reducing overall system complexity while achieving synchronized execution.

Inventive Principle:

Principle #25Self-service

Solution Approach 2:

The system uses feedback from latency measurements to adjust transmission timing parameters. By continuously monitoring execution latencies and using this feedback to refine timing calculations, the system achieves reliable synchronized execution across multiple exchanges while keeping the coordination mechanism simple and automated.

Inventive Principle:

Principle #23Feedback

Data Source

PatentUS9979589B2Coordinated processing of data by networked computing resources

Publication Date: 2018.05.22 ROYAL BANK OF CANADA

AI summary

Systems, methods, and computer-readable media for coordinating processing of data by multiple networked computing resources include monitoring data associated with a plurality of networked computing resources, and coordinating the routing of data processing segments to the networked computing resources.