Matching Engine Synthetic Order Book Combinations
Find Innovative SolutionsGenerate Solutions
Solution Overview
Problem
Conventional electronic trading systems for derivatives exchanges do not optimally match incoming orders as they only consider outright order books and ignore potential matching opportunities from combinations of single and double leg outright order books, leading to suboptimal matching outcomes.
Innovation Solution
A computer-implemented method that determines a best public limit and best match limit for outright order book sides by considering combinations of outright order book sides based on allowed public and match paths, enabling the publication of best prices and facilitating optimal matching across multiple order book sides.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Productivity
If conventional electronic trading systems only consider outright order books for matching, then the system complexity remains low and operation is simple, but matching efficiency deteriorates and trade execution becomes suboptimal
Solution Approach 1:
The patent segments the order book into multiple independent data structures: outright order books for single-leg contracts and synthetic order books for multi-leg combinations. This segmentation allows the system to evaluate multiple matching paths independently while maintaining clear data organization and management, resolving the contradiction between comprehensive matching and system complexity
Solution Approach 2:
The matching engine is designed with multi-functionality to handle both traditional outright order book matching and synthetic order book matching through a unified interface. The system can selectively activate different matching modes (outright only, synthetic only, or combined) based on configuration, providing universal matching capabilities without forcing complexity into all operations
2Measurement precision
If conventional systems use only outright order books, then the data processing load is low, but the quality of price discovery deteriorates
Solution Approach 1:
The system performs preliminary construction of synthetic order books from combinations of outright order books before the matching process. This preliminary action pre-calculates synthetic prices and identifies potential synthetic matches, so that during actual trading the system only needs to compare against pre-prepared synthetic data rather than computing combinations in real-time, thus improving price discovery without proportionally increasing processing load
Solution Approach 2:
The system implements selective synthetic matching by allowing traders and exchanges to configure which synthetic combinations should be considered for matching. Not all possible synthetic combinations are evaluated - only those deemed relevant based on product specifications, trader preferences, or exchange rules. This partial action approach captures the essential benefits of synthetic matching while avoiding the excessive processing burden of evaluating every possible combination
Data Source
AI summary
A computer implemented method and system for publishing best public limits and corresponding quantity and for matching an incoming outright order against price best match limits at corresponding quantities during the continuous trading phase is provided. An incoming outright order is entered in an incoming order book side. It is determined if the incoming outright order satisfies a matching condition by evaluating the sum of the incoming outright order limit and the best match limit of the outright order book side opposing to the incoming outright order book side wherein the best match limit of the outright order book side opposing to the incoming outright order book side also considers outright order book combinations resulting to the outright order book side opposing the incoming outright order book side.