Electronic Trading System Price Change Detection

Resolve Bottlenecks,
Find Innovative SolutionsGenerate Solutions

Solution Overview

Problem

In electronic trading, customers may unwittingly accept changed bid-ask prices from dealers, leading to adverse trades due to lack of visibility in price updates, necessitating a solution to minimize customer mistakes and ensure transparency.

Innovation Solution

A computerized electronic trading system that displays trade requests and quotes on customer and dealer computers, allowing for real-time negotiation and counter-offers, with automatic conversion to a counter state if the customer attempts to execute a trade at a changed price adverse to them, and re-pricing if the new price is more favorable.

Engineering Contradictions & Design Principles

VSEngineering Contradiction Analysis

1Adaptability or versatility

If the dealer is given flexibility to customize the market being made and change bid-ask prices based on market conditions, then the dealer's adaptability and ability to respond to market changes is improved, but the customer may unwittingly accept changed prices leading to adverse trades

Engineering Contradiction:

Improvedealer flexibility to change bid-ask pricesVSAvoidcustomer protection from adverse trades

Core Design Contradiction:

Adaptability or versatilityVSReliability

Solution Approach 1:

The system performs preliminary actions by detecting price changes before the customer can execute a trade, and proactively presents counter offers to the customer. This prevents the customer from unwittingly accepting adverse price changes while still allowing the dealer to flexibly adjust prices based on market conditions.

Inventive Principle:

Principle #10Preliminary action

Solution Approach 2:

The system implements feedback by continuously monitoring price changes and automatically notifying the customer when prices have changed. This feedback loop ensures the customer is informed of adverse price movements before execution, resolving the contradiction between dealer flexibility and customer protection.

Inventive Principle:

Principle #23Feedback

2Reliability

If the system provides real-time price updates and automatic counter mechanisms, then customer protection from adverse trades is improved, but the trading process complexity increases

Engineering Contradiction:

Improvecustomer protection from adverse tradesVSAvoidtrading system complexity

Core Design Contradiction:

ReliabilityVSDevice complexity

Solution Approach 1:

The system performs self-service by automatically detecting price changes, determining whether changes are adverse to the customer, and presenting counter offers without requiring complex manual intervention. This automation reduces the perceived complexity for users while maintaining robust customer protection.

Inventive Principle:

Principle #25Self-service

Solution Approach 2:

The system manages complexity by focusing on key parameter changes (price movements) rather than monitoring all possible trade parameters. This selective monitoring approach provides effective customer protection while keeping the system relatively simple to implement and maintain.

Inventive Principle:

Principle #35Parameter changes

3Loss of information

If the customer is provided with detailed price information and negotiation interfaces, then transparency and customer awareness is improved, but the ease of operation decreases due to additional inputs required

Engineering Contradiction:

Improveprice transparency to customerVSAvoidtrading interface simplicity

Core Design Contradiction:

Loss of informationVSEase of operation

Solution Approach 1:

The system applies partial action by providing price transparency and counter offer mechanisms only when price changes occur, rather than requiring customers to manually review all price parameters continuously. This maintains ease of operation while ensuring necessary information is provided at critical moments.

Inventive Principle:

Principle #16Partial or excessive action

Solution Approach 2:

Instead of requiring the customer to actively monitor and compare prices, the system inverts the approach by automatically detecting price changes and presenting information to the customer. This reversal maintains simplicity for the customer while ensuring comprehensive price transparency.

Inventive Principle:

Principle #13The other way round (Inversion)

Data Source

PatentUS8533099B2System and method for electronically trading derivatives and other financial instruments

Publication Date: 2013.09.10 TRADEWEB MARKETS LLC

AI summary

A computerized electronic trading system and method permits a customer using a customer computer to electronically request a market from a dealer using a dealer computer for a financial instrument through a network. The centralized computer system includes one or more computers and at least one message server for communicating electronic messages between the customer computer and the dealer computer, and a database system including at least one storage device, the database system storing at least information related to a plurality of financial instruments and to a trade executed between the customer and dealer. The computerized electronic trading system is programmed with a request for market module programmed with a trade negotiation sub-component to handle the exchange of messages related to the negotiation of trades, and a trade execution module to negotiate pricing for the financial instrument, including an ability to counter a price quote for the financial instrument are transmitted through the computerized electronic trading system, and execute a trade upon agreement between the customer and the dealer on the price quote.