Order Processing for Automated Market Systems
Find Innovative SolutionsGenerate Solutions
Solution Overview
Problem
Electronic equity markets face challenges in ensuring best trade execution due to rigid priority structures that do not consider factors beyond cost or access fees, potentially forcing public investors to pay ECN quote access fees, thereby limiting competition.
Innovation Solution
A system and method for trading securities in electronic markets that allow clients to specify priorities for how orders interact with contra-side quotes/orders, providing flexible execution options beyond strict price/time priority, including price/size/time and price/time that accounts for ECN access fees, enabling market participants to choose how best to execute their orders.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Productivity
If strict price/time priority structure is implemented, then execution speed and market efficiency are improved, but market participant flexibility and competition are reduced
Solution Approach 1:
The system dynamically adjusts order processing behavior based on the specified priority type. Orders can be processed with price/time priority, price/size/time priority, or price/time priority accounting for ECN access fees, allowing the system to adapt to different market participant needs while maintaining execution efficiency
Solution Approach 2:
The patent changes the processing parameters by introducing multiple priority type options (price/time, price/size/time, price/time with ECN fees). This allows market participants to select different execution criteria based on their specific needs, enhancing flexibility without sacrificing execution speed
2Reliability
If strict price/time priority is enforced, then execution fairness is improved, but ECN quote access fees are forced on public investors
Solution Approach 1:
The system introduces a new parameter dimension (ECN access fee consideration) to the order processing criteria. By offering price/time priority with ECN access fees as an option, the system allows investors to avoid unnecessary ECN fees while maintaining execution fairness through transparent, rule-based processing
3Device complexity
If rigid order processing structure is imposed, then system simplicity is improved, but best execution options are limited
Solution Approach 1:
The order processing system is segmented into distinct priority type options (price/time, price/size/time, price/time with ECN fees). Each segment handles specific execution preferences, allowing the system to provide multiple best execution options while maintaining clear, manageable processing rules for each category
Data Source
AI summary
An electronic market for trading of securities includes a plurality of client stations for entering quotes for securities and a server process that receives quotes from the clients, aggregates the quotes and causes a total of all aggregated quotes to be displayed for a plurality of price levels on the client systems. The market uses a graphical user that depicts aggregated quotes in an aggregate window a plurality of price levels of a product traded in the market. The market also includes processes to handle lock/cross market conditions, match-off of order flow and provides a central quote/order collector that interfaces to disparate order delivery systems to minimize dual liability of market makers.