Match Engine Implied Order Calculation
Find Innovative SolutionsGenerate Solutions
Solution Overview
Problem
Conventional electronic trading systems face limitations in calculating and determining all possible or best possible implied markets due to computational capacity and speed constraints, especially when dealing with complex order combinations involving multiple contracts.
Innovation Solution
The system transforms combination or strategy contracts with arbitrary buy and sell legs and volume ratios into a form suitable for rapid implied order calculations using the match engine modeling language and graph theory, employing techniques like shortest path trees and the Bellman-Ford algorithm to accelerate the calculation of implied orders.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Reliability
If conventional electronic trading systems calculate all possible implied order combinations, then market liquidity improves, but computational capacity and speed deteriorate
Solution Approach 1:
The patent segments the calculation process into two distinct phases: an offline pre-computation phase that generates implication graphs and stores them in databases, and an online real-time phase that retrieves pre-computed results. This segmentation allows the system to handle complex multi-leg security definitions without compromising real-time trading performance, as the computationally intensive work is performed beforehand and stored for rapid retrieval during actual trading operations.
2Measurement precision
If the system handles complex order combinations with multiple contracts, then implied order accuracy improves, but computational complexity increases
Solution Approach 1:
The patent performs preliminary computation of all possible implied order combinations offline before real-time trading begins. The system pre-calculates implication graphs for multi-leg security definitions, stores them in databases, and makes them available for rapid retrieval during trading. This preliminary action ensures high accuracy in implied order calculations while avoiding the computational burden during real-time operations.
Solution Approach 2:
The patent creates simplified copies of complex security definitions in the form of pre-computed implication graphs. Instead of processing the full complexity of multi-leg security definitions with arbitrary volume ratios during real-time trading, the system uses copied representations (implication graphs) that capture the essential trading relationships in a computationally efficient format that can be rapidly queried and executed.
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 transforming a combination or strategy contract with an arbitrary number of buy and sell legs with an arbitrary volume ratio for each leg into a form that can be used for rapid implied order calculations.