Automated Parity on Close Orders Trading Platform
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Solution Overview
Problem
Traditional order management systems for derivatives trading lack efficiency in providing parity on close orders, leading to inefficiencies in order execution and liquidity provision.
Innovation Solution
An automated trading platform and method that includes an electronic trade engine receiving orders, disseminating requests for price messages with a parity amount to market makers, and allocating orders based on received fee-inclusive price messages, ensuring parity on close orders are executed with an accommodation fee.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Productivity
If traditional order management systems are used for derivatives trading, then system simplicity is maintained, but order execution efficiency and liquidity provision deteriorate
Solution Approach 1:
The system segments the order management process into distinct functional modules: parity calculation module, message dissemination module, fee allocation module, and order execution module. Each module handles a specific aspect of the parity on close order process, allowing for specialized optimization while maintaining overall system efficiency.
Solution Approach 2:
The patent introduces an intermediary automated trading platform that mediates between traditional order management systems and the electronic exchange infrastructure. This intermediary layer handles the complex parity calculation and fee allocation logic, enabling efficient order execution without requiring fundamental changes to existing exchange infrastructure.
2Loss of information
If automated parity calculation and fee allocation is implemented, then order visibility and competition increase, but system complexity increases
Solution Approach 1:
The system implements feedback mechanisms where price messages from multiple market makers are collected, compared, and used to determine optimal order allocation. The parity amount and accommodation fees are calculated based on feedback from market maker responses, ensuring transparent and competitive order execution while maintaining manageable system complexity through structured feedback loops.
Data Source
AI summary
An automated system for creating parity on close orders in an exchange configured for trading securities or derivatives is disclosed including an electronic trade engine operative to receive an order for a security or derivative at the exchange, the trade engine further operative to disseminate a request for a price message to a plurality of market makers quoting a class in response to receiving the order, wherein the request for a price message includes a parity amount for the order; an electronic book in communication with the electronic trade engine, the electronic book operative to store at least one order received by the electronic trade engine; and wherein, in response to the request for a price message, the electronic trade engine receives at least one price message that includes a fee in addition to the parity amount.