Trading Order Prioritization by Fill Rate and Response Time
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Solution Overview
Problem
Current trading systems face inefficiencies in matching and executing orders due to varying fill rates and response times among providers, leading to suboptimal trade execution and increased complexity in prioritizing orders.
Innovation Solution
Implementing a system where orders are prioritized based on fill rates and response times, with the ability to disregard orders that do not meet a defined threshold, ensuring that only high-fill-rate orders are executed first, and allowing providers a 'second look' to confirm trades, thereby optimizing trade execution.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Productivity
If orders are processed in first-come-first-served manner, then simplicity of order processing is maintained, but trade execution efficiency deteriorates due to varying fill rates and response times
Solution Approach 1:
The system dynamically adjusts order priority based on real-time fill rate and response time metrics. Orders are not statically queued but re-ranked as new information arrives, allowing the system to adapt to changing market conditions and provider performance, thereby improving execution efficiency without requiring complex manual intervention
Solution Approach 2:
The patent replaces manual order prioritization mechanisms with an automated electronic system that calculates fill rates and response times, then automatically reorders the queue. This substitution of mechanical/manual processes with computational algorithms improves efficiency while the automation handles the complexity, reducing the perceived complexity for users
2Productivity
If all received orders are executed, then order volume is maximized, but execution quality deteriorates due to inclusion of low-fill-rate orders
Solution Approach 1:
The system performs preliminary evaluation of provider fill rates and response times before executing trades. By pre-screening orders based on historical performance data and current metrics, the system ensures that only high-quality orders from reliable providers are executed, maintaining consistent execution quality without sacrificing productivity
Solution Approach 2:
The system continuously monitors fill rates and response times, using this feedback to adjust order prioritization in real-time. Providers with deteriorating performance see their orders deprioritized, while high-performing providers receive preferential treatment, creating a self-correcting mechanism that maintains reliability and execution quality over time
3Measurement precision
If response time is minimized for all orders, then speed of execution is improved, but accuracy deteriorates due to premature execution decisions
Solution Approach 1:
The system applies different response time thresholds to different orders based on their priority classification. High-priority orders from top-performing providers receive expedited processing with minimal delay, while lower-priority orders undergo more extensive evaluation. This partial application of speed optimization maintains accuracy for critical trades while accepting reasonable delays for less critical ones, preventing premature execution decisions across the board
Data Source
AI summary
According to various embodiments, trades may be filled based at in part on order price and fill rates determined for providers of orders. In some embodiments, orders at a given price in an order book may be ordered in order of decreasing fill rate, such that orders associated with a higher fill rate (or higher probability of fill) are preferenced above orders associated with a lower fill rate. In some embodiments, order books may also be ordered based in part on response times from order providers. For example, orders in an order book may be ordered according to an algorithm that preferences higher fill rates and shorter response times ahead of orders with lower fill rates and longer response times. Order book ordering algorithms may also consider order quantity and interdependence and duplication of order quantity.