Multi-Clearinghouse Trading Platform with Segmented Order Matching

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Solution Overview

Problem

Current financial trading systems face challenges in efficiently processing and matching orders across multiple clearinghouses, leading to issues with liquidity, transparency, and user control over clearinghouse preferences, particularly in the context of credit default swaps and over-the-counter financial products.

Innovation Solution

A regulated trading platform that allows users to interact with multiple clearinghouses, providing differentiated prices and enhanced graphical user interfaces to manage orders and clearinghouse preferences, enabling users to select desired clearinghouses and view actionable prices, while aggregating trades across multiple clearinghouses for improved liquidity and transparency.

Engineering Contradictions & Design Principles

VSEngineering Contradiction Analysis

1Reliability

If a trading platform processes orders across multiple clearinghouses, then liquidity and transparency are improved, but system complexity and processing difficulty increase

Engineering Contradiction:

ImproveliquidityVSAvoidsystem complexity

Core Design Contradiction:

ReliabilityVSDevice complexity

Solution Approach 1:

The system segments order processing by clearinghouse, with each clearinghouse handled as a separate entity with its own pricing and matching rules. The matching engine processes orders independently for each clearinghouse combination, allowing complex multi-clearinghouse operations to be broken into manageable segments that can be processed systematically

Inventive Principle:

Principle #1Segmentation

Solution Approach 2:

The trading platform acts as an intermediary between users and multiple clearinghouses, abstracting the complexity of multi-clearinghouse interactions. The system receives orders from users, automatically determines appropriate clearinghouse combinations, and handles the complex routing and matching logic, shielding users from the underlying system complexity while maintaining high liquidity

Inventive Principle:

Principle #24Intermediary (Mediator)

2Adaptability or versatility

If users are given control over clearinghouse preferences, then user control and flexibility are improved, but order matching complexity increases

Engineering Contradiction:

Improveuser controlVSAvoidorder matching complexity

Core Design Contradiction:

Adaptability or versatilityVSDevice complexity

Solution Approach 1:

The system dynamically adjusts matching behavior based on user preferences and market conditions. Users can specify clearinghouse preferences that are stored and applied automatically during order processing. The matching engine adapts its behavior in real-time based on these preferences, available clearinghouse combinations, and current market liquidity, resolving complexity dynamically rather than through static complex rules

Inventive Principle:

Principle #15Dynamics

Solution Approach 2:

Users pre-configure their clearinghouse preferences before placing orders. These preferences are stored in the system and automatically applied when orders are received, eliminating the need for complex real-time decision-making during order processing. The system performs preliminary setup of user preferences, which simplifies the actual matching operation

Inventive Principle:

Principle #10Preliminary action

3Loss of information

If differentiated prices are provided for the same financial product across multiple clearinghouses, then transparency and user benefit are improved, but information processing and display complexity increase

Engineering Contradiction:

Improveprice transparencyVSAvoidinformation processing complexity

Core Design Contradiction:

Loss of informationVSDevice complexity

Solution Approach 1:

The system applies local quality by providing clearinghouse-specific pricing information for each clearinghouse combination. Instead of a single aggregated price, the system displays differentiated prices tailored to each clearinghouse, allowing users to see the specific price implications of clearing through different institutions. This localized pricing information is presented in a structured format that manages complexity while maximizing transparency

Inventive Principle:

Principle #3Local quality

4Reliability

If the system aggregates trades across multiple clearinghouses, then liquidity is improved, but processing time and computational resources increase

Engineering Contradiction:

ImproveliquidityVSAvoidprocessing time

Core Design Contradiction:

ReliabilityVSLoss of time

Solution Approach 1:

The matching engine segments the aggregation process by processing orders for each clearinghouse combination separately rather than attempting to aggregate all clearinghouses simultaneously. This segmented approach allows liquidity to be accumulated across multiple clearinghouses while maintaining manageable processing times through systematic, modular computation

Inventive Principle:

Principle #1Segmentation

Data Source

PatentUS8626639B2Trade matching platform with variable pricing based on clearing relationships

Publication Date: 2014.01.07 CHICAGO MERCANTILE EXCHANGE INC

AI summary

The disclosure describes a regulated trading platform capable of communicating with a plurality of clearing houses. In particular, aspects of the disclosure relate to providing and/or calculating differentiated prices for the same or underlying financial product/instrument capable of being cleared at different clearing houses. The trading platform may allow anonymous counterparties in a multi-clearinghouse environment, and with full transparency and improved liquidity. The trading platform may also allow for non-anonymous counterparties in some situations.