Trading Order Priority Using Display and Reserve Portions
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Solution Overview
Problem
Existing electronic trading systems face challenges in maintaining liquidity and transparency due to rules that hinder the processing sequence of trading orders, leading to increased network traffic and uncertainty for traders regarding order priority.
Innovation Solution
A system and method that allows traders to designate a display portion and a reserve portion of their orders, with the display portion being immediately disclosed while the reserve portion is protected until certain conditions are met, and prioritizing the filling of display portions before granting priority status, thereby reducing network traffic and increasing transparency and liquidity.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Reliability
If trading orders are processed according to traditional rules, then order processing sequence is maintained, but liquidity and transparency are decreased
Solution Approach 1:
The system performs preliminary actions by designating display portions of orders to be filled first before reserve portions, and by offering remaining counterorders to priority traders before making them available to others. This preliminary processing of display portions improves liquidity while maintaining a form of processing sequence through the priority designation.
2Reliability
If traditional order processing rules are applied, then processing sequence is preserved, but network traffic increases
Solution Approach 1:
The system extracts the display portion of trading orders from the complete order and processes it separately and prioritarily. By separating display portions from reserve portions and processing only the display portions first, the system reduces the volume of data that needs to be processed and communicated over the network, thereby reducing network traffic.
3Loss of information
If display portions are filled before priority status is granted, then transparency is increased, but order priority uncertainty increases for traders
Solution Approach 1:
The system performs preliminary designation of priority status for traders whose orders contain display portions. This preliminary action occurs before the actual filling of display portions, providing traders with advance notice of their priority status and reducing uncertainty about order processing priority while still maintaining transparency about which portions will be filled first.
Data Source
AI summary
A system for managing trading orders comprises a memory to store a first trading order for a particular trading product, wherein the first trading order comprises display and reserve portions and is received from a first trader. The memory may store a second trading order for the particular trading product, wherein the second trading order comprises display and reserve portions and is received from a second trader after the first trading order. A processor of the system communicatively coupled to the memory may receive from a counterparty trader a counterorder for the trading product. The processor may use the counterorder to fill the display portions respectively of the first and second trading orders. After filling the display portion of the second trading order, the processor may exclusively offer at least a portion of the counterorder to the first trader for a configurable period of time.