Request for Cross Trading Engine Mechanism
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Solution Overview
Problem
Existing trading systems face inefficiencies in matching orders in illiquid markets, where orders may rest for a long time without matching due to unsuitable prices, leading to a need for a more robust and efficient trade matching system.
Innovation Solution
The implementation of request for cross functionality, which allows brokers to submit requests for quotes to determine liquidity, contact market makers for better prices, and initiate a request for cross, informing the marketplace of an impending match, enabling additional market participants to place orders and complete customer orders within a specified timeframe.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Productivity
If orders are placed in the order book and waited for matching in a conventional trading system, then the order book maintains continuous two-sided market functionality, but orders may rest for a long time without matching in illiquid markets
Solution Approach 1:
The system performs preliminary actions by proactively contacting market makers and other participants before the customer is ready to execute. The broker initiates a request for cross functionality, which triggers a sequence of pre-matchmaking activities including contacting market makers, receiving price quotes, and preparing matching logic in advance. This allows the system to prepare potential matches before the customer finally decides to execute, significantly reducing waiting time in illiquid markets.
Solution Approach 2:
The system implements feedback mechanisms by continuously monitoring market conditions, receiving price quotes from market makers, and using this information to dynamically adjust matching strategies. The broker receives feedback on market liquidity and pricing from multiple sources, then uses this feedback to make informed decisions about when and how to execute customer orders, improving both matching efficiency and timing.
2Ease of manufacture
If the broker contacts market makers to request best prices without revealing full order information, then market participants are incentivized to provide better pricing, but the complexity of the matching process increases
Solution Approach 1:
The system segments the order execution process into distinct phases: initial order placement, request for cross functionality initiation, market maker contact phase, pricing reception phase, and final matching execution. Each phase handles a specific aspect of the complex task independently, making the overall process more manageable. The broker separately manages market maker contacts, price quote collection, and customer order matching, dividing the complexity into discrete, controllable segments.
Solution Approach 2:
The broker acts as an intermediary between the customer and the market makers. Instead of the customer directly interacting with multiple market makers, the broker consolidates these interactions into a coordinated process. The broker receives price quotes from market makers, evaluates them against customer criteria, and then executes the matching, simplifying the customer's experience while managing the underlying complexity of coordinating multiple market participants.
Data Source
AI summary
Systems and methods are provided to fulfill customer trading orders in an illiquid two sided market. Request for cross functionality may be implemented in a trading environment using a trading engine for the matching of trades involving financial instruments. Request for cross functionally integrates the benefits of a dual bid-ask continuous trading market model with the price and quantity trade matching systems and methods.