Order Matching Intervals to Reduce Electronic Trading Races
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Solution Overview
Problem
Conventional electronic trading systems face challenges in efficiently matching contra-side orders due to the race among traders to be the first to send orders, leading to increased demand for enhanced processing capabilities and infrastructure expansion.
Innovation Solution
Decoupling order entry intervals from matching intervals, allowing traders to submit orders within a defined period followed by a subsequent processing and matching process these within, thereby reducing the race to be the first to be the first to send orders within the same or earlier order entry interval, and coordinating with other exchanges during a separate coordination interval.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Speed
If continuous order matching is implemented to accommodate trader speed requirements, then trading responsiveness is improved, but processing capability demands and infrastructure costs increase
Solution Approach 1:
The patent segments the continuous trading process into discrete time intervals (order entry intervals and matching intervals). Orders are accumulated during order entry intervals and then processed together during matching intervals, rather than processing each order immediately upon receipt. This segmentation reduces the peak processing burden while maintaining trading responsiveness.
Solution Approach 2:
The patent implements periodic matching intervals where all orders accumulated during the preceding order entry interval are processed together. This periodic action pattern allows the system to handle trading responsiveness requirements while reducing continuous processing demands, as matching occurs in regular bursts rather than continuously.
2Productivity
If order entry and matching are decoupled into separate intervals, then processing efficiency is improved, but system complexity increases
Solution Approach 1:
The patent divides the trading system into distinct functional segments: order entry intervals for order accumulation and matching intervals for order processing. This segmentation improves processing efficiency by allowing orders to be batched and processed together, while the complexity is managed through clear separation of these functions in time.
Solution Approach 2:
The patent introduces dynamic interval structures where order entry intervals and matching intervals can vary in duration and be configured based on market conditions and processing requirements. This dynamic approach allows the system to adapt processing efficiency to different scenarios while maintaining a relatively simple underlying architecture.
3Adaptability or versatility
If multiple exchanges coordinate matching operations, then market liquidity is improved, but coordination complexity increases
Solution Approach 1:
The patent segments coordination operations into specific matching intervals where multiple exchanges synchronize their order processing. During these coordinated intervals, exchanges exchange matching information and process orders together, improving market liquidity through enhanced price discovery and execution opportunities, while limiting coordination complexity to specific time windows rather than continuous operation.
4Speed
If traders race to submit orders first, then trading speed is improved, but infrastructure expansion requirements increase
Solution Approach 1:
The patent implements periodic matching intervals that occur at regular intervals, during which all orders accumulated since the last matching interval are processed together. This periodic structure reduces the incentive for traders to race to submit orders, as all orders submitted during an order entry interval are processed equally during the subsequent matching interval, thereby reducing the need for infrastructure expansion to handle increased order volumes.
Data Source
AI summary
Methods, system and articles of manufacture are disclosed including configurable order entry, matching, coordination and market data intervals. An example method to decouple order entry and matching of contra-side orders includes receiving a trade order during an order entry interval, wherein the order entry interval defines a first period. The example method also includes starting a matching interval at the expiration of the order entry interval, wherein the matching interval includes a second period and wherein the first period is contiguous to the second period. The example method further includes matching the trade order, during the matching interval, with one or more opposing tradable object trade orders received during the order entry interval, the trade order having a same price or same quantity as the one or more opposing trade orders.