Post-Matching Trading System for Financial Liquidity
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Solution Overview
Problem
Conventional trading systems restrict trading to the mid-price during the matching phase and lack a mechanism for post-matching trading sessions, limiting flexibility and liquidity.
Innovation Solution
Implementing a financial instrument transaction system that allows trading at prices different from the mid-price, with a post-matching session initiated based on predefined criteria, enabling traders to enter orders at alternative levels and execute trades via a graphical user interface, and utilizing a Join-the-Action (JTA) process to enhance liquidity.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Adaptability or versatility
If trading is restricted to mid-price during matching phase, then price determination is simplified, but trading flexibility and liquidity are reduced
Solution Approach 1:
The trading system is divided into distinct phases: matching phase with mid-price trading, and post-matching phase with alternative price level trading. This segmentation allows the system to maintain simplicity during matching while enabling flexibility during post-matching, resolving the contradiction between trading flexibility and system complexity
Solution Approach 2:
The system dynamically transitions from a fixed mid-price matching mechanism to a flexible alternative price level post-matching mechanism. This dynamic adaptation allows the system to provide trading flexibility when needed while maintaining operational simplicity through automated phase transitions based on predefined criteria
2Quantity of substance
If post-matching session is implemented, then liquidity is increased, but system complexity increases
Solution Approach 1:
The system pre-defines criteria for initiating post-matching sessions and pre-establishes the trading framework. This preliminary preparation allows the system to automatically transition to post-matching when conditions are met, increasing liquidity without requiring complex real-time decision-making or manual intervention
Solution Approach 2:
The system automatically determines whether to transition to post-matching based on predefined criteria such as trading volume or time thresholds. This self-service mechanism enables the system to manage its own complexity by autonomously deciding when to activate the more complex post-matching functionality, thereby increasing liquidity without proportionally increasing operational complexity
3Duration of action of moving object
If trading is limited to matching phase only, then system operation is simplified, but trading duration is reduced
Solution Approach 1:
The system operates in periodic cycles: matching phase followed by conditional post-matching phase. This periodic structure extends trading duration by adding a second phase while maintaining operational simplicity through automated transition rules that eliminate the need for manual system reconfiguration
Data Source
AI summary
Systems and methods for implementing post-matching trading are provided. A financial instrument transaction system may include a database configured to store financial instrument information for reference entities; a memory for storing execution instructions; and a processor. The processor may execute the instructions. The processor may initiate a trading session for a predetermined duration. Prior to and during the trading session, the processor may receive from a plurality of trader clients trading instructions associated with the reference entity. The instructions may include either a buy or sell position and a price. At the end of the trading session, the processor may determine, based on predefined criteria, whether the trading session qualifies for a post-matching session. If the trading session qualifies for a post-matching session, the processor may provide a graphical user interface to a selected group of traders for trading in the post-matching session.