Network Interface Device Enforcing Financial Compliance Rules
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Solution Overview
Problem
High-speed trading engines in financial markets operate at timescales that make it difficult to monitor and control their behavior, leading to risks of dangerous trading activities and potential market disruptions, and there is a need for mechanisms to enforce risk boundaries and ensure trustworthy communications within and across network entities.
Innovation Solution
A network interface device with a packet inspector that identifies compliance rules associated with data flows, performs actions based on these rules, and includes a logic device for enforcing financial compliance rules, which can parse trade orders, match them against predefined patterns, and filter actions to prevent excessive trading or malicious communications.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Speed
If trading engines operate at very high speeds to respond timely to market data, then trading responsiveness is improved, but the ability to monitor and control trading behavior deteriorates
Solution Approach 1:
A compliance filter is introduced as an intermediary component between the high-speed trading engine and the market data feed. This filter operates autonomously to enforce risk boundaries and compliance rules on trading algorithms, enabling monitoring and control without directly interfering with the high-speed trading operations. The filter acts as a mediator that allows fast trading while maintaining oversight through separate rule-based enforcement mechanisms.
2Productivity
If trading algorithms operate autonomously to execute trades within very short timescales, then trading efficiency is improved, but the ability to prevent dangerous trading behavior deteriorates
Solution Approach 1:
Compliance rules and risk boundaries are pre-configured in the compliance filter before trading algorithms execute. The filter is programmed with predetermined compliance criteria that automatically enforce constraints on trading behavior. This preliminary setup allows autonomous high-speed trading while pre-established rules prevent dangerous behaviors from occurring, as the filter blocks non-compliant trades before they can cause harm.
3Speed
If data flows are unrestricted to enable high-speed trading, then trading responsiveness is improved, but the risk of malicious or erroneous communications increases
Solution Approach 1:
The compliance filter extracts and separates security checking functions from the main high-speed data flow path. By taking out the compliance verification process into a dedicated filter component, the system can maintain fast unrestricted data flow for legitimate trading while simultaneously removing harmful communications through the separate filter mechanism. This extraction allows security enforcement without bottlenecking the primary trading data flow.
Data Source
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AI summary
A logic device for intercepting a data flow from a network source to a network destination, the logic device comprising: a data store holding a set of compliance rules and corresponding actions; a packet inspector configured to inspect the intercepted data flow and identify from the data store a compliance rule associated with the inspected data flow; and a packet filter configured to when the data flow is identified as being associated with a compliance rule, carry out an action with respect to the data flow corresponding to the compliance rule, wherein the data store comprises an interface configured to receive updates to the compliance rules and corresponding actions in the data store from a control engine, wherein the updates are authenticated using at least one key accessible to the logic device.