Trader List Segmentation for Order Routing
Find Innovative SolutionsGenerate Solutions
Solution Overview
Problem
Electronic trading systems lack effective mechanisms to manage trading orders and prevent unprofitable or nuisance trades, as they do not allow traders to exclude specific traders from receiving orders or price feeds based on their preferences.
Innovation Solution
A system and method that utilize trader lists to manage trading orders by designating specific traders with whom a trader does not want to interact, preventing the transmission of orders and price feeds to those traders, thereby allowing traders to manage risks and avoid unprofitable or nuisance trades.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Productivity
If trading orders are transmitted to all traders in the system, then market liquidity and trading opportunities are maximized, but traders are exposed to unprofitable or nuisance trades with unwanted counterparties
Solution Approach 1:
The system segments the trader population by introducing trader lists that divide potential counterparties into desired and undesired groups. Each trader can maintain a personalized list of traders they wish to avoid, creating segmented routing paths for order transmission that exclude specific individuals while maintaining broad market access.
Solution Approach 2:
The system applies local quality by allowing each trader to have customized routing preferences specific to their individual needs and risk tolerances. The order routing is not uniformly applied to all traders but is locally adjusted based on the submitting trader's preferences and the specific counterparty relationships they wish to avoid.
2Reliability
If traders can exclude specific counterparties from receiving orders, then risk management is improved, but system complexity increases due to additional routing logic
Solution Approach 1:
The system implements self-service by allowing traders to autonomously manage their own counterparty preferences through trader lists. Each trader independently configures whom they wish to avoid without requiring system-wide policy decisions or complex centralized control mechanisms, simplifying the overall system architecture.
Solution Approach 2:
The system performs preliminary action by pre-establishing trader lists that define desired and undesired counterparties before order submission. This advance configuration allows the order routing system to simply check against predefined lists rather than making complex real-time decisions about counterparty suitability, reducing computational complexity.
Data Source
AI summary
A system for managing trading orders comprises a memory operable to store a trader list that is associated with a first trader and that designates one or more other traders. The system further comprises a processor communicatively coupled to the memory and operable to receive a trading order from the first trader. The processor is further operable to transmit the trading order to a plurality of traders, wherein the plurality of traders does not comprise any of the one or more designated traders from the trader list. The processor is further operable to prevent the transmission of the trading order to the one or more designated traders.