Trading Order Routing System with Dynamic Price Comparison
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Solution Overview
Problem
Existing electronic trading systems face inefficiencies in routing trading orders to market centers, leading to increased transaction costs and inadequate disclosure control, as they lack advanced mechanisms for comparing market center prices and managing order disclosure policies.
Innovation Solution
A system comprising a processor and memory that determines market center prices, adjusts prices based on policy, cost, and rebate information, and routes trading orders to optimize price achievement while controlling disclosure and minimizing transaction costs through internal order matching and timeout management.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Speed
If trading orders are routed to multiple market centers without price comparison, then order execution speed is improved, but transaction costs increase
Solution Approach 1:
The system dynamically changes the routing parameter (market center selection) based on price parameters. It compares prices across multiple market centers and selects the optimal one, transforming static routing into dynamic parameter-based routing that optimizes transaction costs while maintaining execution speed.
Solution Approach 2:
The routing system transitions from static to dynamic operation by continuously monitoring and comparing market center prices. The system adapts its routing decisions in real-time based on current price conditions, making the order execution process dynamic and responsive to market changes.
2Measurement precision
If full order quantity is disclosed to market centers, then market centers can provide better pricing, but trading strategy confidentiality is compromised
Solution Approach 1:
The system segments the order quantity information, disclosing only partial quantities to individual market centers while retaining the full order details internally. This segmentation allows market centers to provide competitive pricing based on visible quantities without revealing the complete trading strategy or total order size.
Solution Approach 2:
The system acts as an intermediary between the trader and market centers, controlling the flow of information. It selectively discloses order information to market centers while maintaining confidentiality of the complete trading strategy, mediating between the need for pricing information and information security.
3Loss of energy
If trading orders are monitored continuously for timeout, then transaction cost avoidance is improved, but system complexity increases
Solution Approach 1:
The system performs preliminary actions by setting timeout thresholds and monitoring mechanisms in advance. It proactively tracks order status and automatically executes cancellation or redirection before transaction costs are incurred, preventing cost losses rather than reacting to them after occurrence.
4Productivity
If market center prices are adjusted based on policy and cost information, then routing optimization is improved, but processing time increases
Solution Approach 1:
The system performs preliminary adjustments to market center prices based on policy and cost information before actual order routing decisions are made. By pre-calculating adjusted prices and storing them, the system optimizes routing decisions without adding processing time during critical order execution moments.
Data Source
AI summary
A system for routing a trading order to a market center comprises a memory and a processor. The memory stores a trading order specifying a trading product. The processor determines a plurality of market center prices for the trading product, each market center price associated with at least one of a plurality of market centers. The processor selects one of the plurality of market centers based upon the determined market center prices. The processor further determines a disclosure policy for the selected market center and routes the trading order to the selected market center according to the determined disclosure policy.