Patent Application
20110320336
Present invention relates to a method and a system for trading in automated exchange, and more particularly it relates to a computer system enabling, and a method for, entering market input data into an automated exchange.
The financial industry is a very important contributor for development of society. For example, the financial industry makes it possible, amongst other, for various companies to obtain investment money or to secure themselves from different kinds of financial risks and so forth. A strong financial industry is thus essential for trade, industry and economical development.
In the past ten-, to twenty years the financial industry has had a very rapid development, mainly due to technological advances in computing technology, transaction technology and information technology. As a result of the rapid development in the financial industry, more participants than ever; i.e. companies and people, are connected to existing financial systems; typically electronic exchange systems. The increase of participants being connected to the electronic exchange systems has thus also increased the amount of data, typically in form of standardized messages, sent to and from these electronic exchange systems. Furthermore, the development of algorithmic trading has also, even further, increased the amount of data messages being sent into said electronic exchange systems.
A conventional electronic exchange system typically receives input data in form of data messages, primarily from external devices used by traders. The data messages are typically for submitting orders, alterations/cancellations thereof and/or quotes, to the electronic exchange system. The orders, or quotes, typically relates to buying and/or selling of any type of financial instrument. In particular the input data messages typically relates to an order message representing submitting a new bid-, or sell order, or a new quote into the electronic exchange system. The input data message may also represent a change of an existing bid-, or sell order, or a quote. In addition to the above the input data message may represent a cancellation, or change, of an existing bid-, or sell order, or a quote.
Thus as has been established above, during the last decade, or so, the number of financial transactions taking place at various electronic exchange systems has increased. Shares at electronic exchange systems are nowadays typically traded in the billions, each and every market day.
However, in order for a trade to actually take place, the exchange system matches a buy order against a sell order, for each and every instrument. Each performed trade in an instrument thus requires at least two orders to be entered into the exchange system and with the amount of trades increasing, the numbers of market actions (for example buy/sell orders, buy/sell quotes, update orders and delete orders) sent to the exchange system also increases.
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One of the reasons to why the number of market actions are increasing is that algorithmic trading has been adopted by the financial industry. An algorithmic trading unit typically adapts to changes much faster than a manual trader. High speed execution of input data is a feature that is desired by users of algorithmic trading units and as a result, the speed; in terms of round trip time for a transaction sent to an automated exchange, has significantly increased over the last couple of years.
When trading it is typically desired to complete a full trading cycle, i.e. (1. information retrieval->2. decision making->3. produce market input data (insert, delete, update order)->4. get the market action in the market) as fast as possible. By using a computerised algorithmic trading unit, a trading algorithm can take care of step number 2 and 3 in the trading cycle at a very high speed.
However, the difference in time it takes to complete step 2 and 3 of a trading cycle is negligible in comparison to the time it takes to complete step 1 and step 4. Thus in order to further improve trading speed, a few different solutions to minimize the latency in step 1 and 4 can be used. For example a trading participant can use a lot of bandwidth to have a fast communication with the exchange, or the trading participant can use a dedicated fibre link to increase its communication speed with the exchange system.
However, some trading participants place their trading server, on which the algorithm runs, as close to the actual exchange system servers as possible, thereby minimizing the number of router hops and physical distance between the trading server and the exchange system servers. For the latter, some exchange operators may even allow trading participants to place its hardware in the same physical room as the exchange servers are situated. This is in the industry known as co-location and is used by some major exchange system operators. But, even with the solutions of today, the latency brought on by step 1 and 4 of the trading cycle is rather significant, compared to the time it takes to perform step 2 and 3 of the trading cycle. Thus there is a still a desire to minimizing latency in step 1 and 4 of the trading cycle.
A further problem that arises when using an algorithmic trading unit is that with the enhanced speed, traders adapts faster to different market scenarios (retrieving information, analysing and producing market actions to counter new scenarios), hence a new burden is placed on the electronic exchange system, as its information disbursement also increases at a rapid rate, with the growing number of received input data. At the same time, the growing number of orders and quotes directed towards the exchange system also puts the exchange system under high pressure by creating latency issues as the market actions have to process and forward by the entry gateways of the exchange systems. Sometimes also other processes have to be processed before the market actions reach the core of the automated exchange system.
As electronic exchange systems have a hard time to keep up with the massive amount of messages being received and distributed, message handling constitutes a bottleneck which puts a limitation on the performance of the system. Thus, another problem with existing systems is that they have a low throughput.
These problems have, so far, been countered for by constantly upgrading the exchange system hardware. This is a costly and inefficient way of handling the described problems, as the amount of market actions will continue to increase, particularly as more and more financial participants adapt to algorithmic trading. Thus there is a need to counter for the increasing amount of market actions and information data in an efficient manner. Hence there is a need of an improved electronic exchange system that allows a higher throughput of input data messages and a lower overall latency.
An object of the embodiments of the present invention is to provide a solution improving the performance of an electronic exchange system. It is another object of the embodiments of present invention to increase the throughput of an electronic exchange system. It is yet a further object of embodiments of the present invention to minimize the latency associated with entering market actions in the form of input data messages comprising new, altered or cancelled orders and or quotes.
It is yet a further object of embodiments of the present invention to provide a solution that minimizes the hardware requirements of entry gateways of an automated exchange.
It is yet a further object of embodiments of the present invention to limit the amount of data in the information flow to-, and from the exchange system, in order to minimize bandwidth usage.
At least one of the above problems is addressed by embodiments of the present invention as set out in the appended independent claims. Advantageous embodiments are recited in the appended dependent claims.
In accordance with an exemplary embodiment an automated exchange system for matching order and quotes in a number of financial instruments is provided. The automated exchange system is arranged to receive orders and quotes via an external interface and comprises a matching module for matching the orders and the quotes, and a memory module for storing orders and quotes which are not immediately matched by the matching module. In addition it comprises an application module which is arranged to automatically generate input data messages comprising new, altered or cancelled orders and or quotes to be sent to the matching module via an internal interface. Such automated exchange system has the advantage that it makes it possible to minimize the latency normally associated with market actions being entered into the marketplace. As such, the computerized automated exchange system also provides for increased throughput. The above configuration of the automated exchange system affects the technical working of the system by reducing the sheer amount of data that have to be communicated to and from the computerized automated exchange system.
In accordance with a further embodiment, the application module comprises at least one trading module implementing an algorithmic trading unit.
In accordance with yet a further embodiment, the module implementing an algorithmic trading unit is a plug-in module.
In accordance with one embodiment, the internal interface is arranged to validate a message generated in the application module before it is sent to the matching module.
In accordance with one embodiment the internal interface is arranged to not send a message to the matching module if the message is found to be invalid.
In accordance with one embodiment market data is provided to the application module and or the trading module.
In accordance with one embodiment the trading module is adapted to receive messages via the external interface.
In accordance with one embodiment computer code of the respective at least one trading module is executed on a separate computer processor located on the same mother board as a computer processor executing code for implementing the matching of the matching module
In accordance with one embodiment computer code of the respective at least one trading module is executed in a different computer processor core of a multi core processor than the core used for executing code for implementing the matching of the matching module.
In accordance with one embodiment a method for generating input data messages comprising new, altered or cancelled orders and or quotes in an automated exchange system in a number of financial instruments is provided. The method is performed in system comprising an external interface for receiving orders and quotes, a matching module for matching orders and quotes, and a memory for storing orders and quotes not immediately matched by the matching module. The method can comprising the steps of automatically generating input data messages comprising new, altered or cancelled orders and or quotes generate in an internal application module, and sending the input data messages to the matching module via an internal interface.
In accordance with one embodiment the input data messages are generated in a trading module implementing an algorithmic trading unit.
In accordance with one embodiment the method comprises the step of validating an input data message before it is sent to the matching module.
In accordance with one embodiment a message is not sent to the matching module if said message is found not to be valid.
In accordance with one embodiment input data messages are generated in response to received market data.
In accordance with one embodiment input data messages is generated in response to messages received via the external interface.
The computer system and method as described herein has the advantage that it makes it possible for a central computer system, such as an automated electronic exchange or a trading system, to minimize the latency normally associated with market actions being entered into the marketplace. As such, the computer system also provides increased throughput. The configuration of the system affects the technical working of the system by reducing the amount of data being communicated to, and from, the computer system.
As described above the matching module may be located at a first core in a multi-core processor and the application module may be located at a second core of the same multi-core processor. Also the processors of the application module and the matching module can be served by processors located on the same mother board. For computer systems having this configuration, the latency associated with entering market actions can greatly be reduced, while the matching module still can maintain its resources.
Furthermore the computer system has the additional advantage of being scalable as it can allow for multiple trading modules, in particular plug-in trading modules to be installed into application module of the system.
Thus, this allows for proprietary plug-ins from members and third parties to be injected into the system as ordinary modules of the system are shielded from the plug-in trading modules.
The computerized automated exchange system has the advantage that it makes it possible for a full trading cycle to be performed without any data being transferred through any systems or processes outside the core parts of the computer system containing the matching module.
The automated exchange system can be provided with an interface configured to receive market data, market actions, configuration transactions and data messages feeding the application module and/or the trading module with information and instructions. The interface can be an interface connectable to a network of for instance adapted for TCP/IP connections or the alike and may further be configured to broadcast market data.
The automated exchange system can be arranged to receive market data, and to provide the data to the application module with the market data. In one embodiment market data can be received from external sources and in another it could be provided by from the matching module from within the system, after which it is provided to the application module. Thus, trading modules of the application module can use the market data in a decision making process when generating input data messages comprising new, altered or cancelled orders and or quotes in the automated exchange system.
The computer system can be arranged to receive configuration transactions, and to provide the trading units with the configuration transactions. Thus, by sending configuration transactions to the computer system a proprietor of a trading unit installed in the system can control the behaviour of the trading unit. In accordance with one embodiment all such messages can be verified by the application module before entered into a trading module.
These and other aspects of and advantages with the present invention will become apparent from the following detailed description and from the accompanying drawings.
In the following description of embodiments of the invention, reference will be made to the accompanying drawings of which:
Embodiments of present invention will now be described in detail. As should be noted in present application, when the term “financial instrument” is used, it is used in a broad sense, refers to and encompasses, any tradable item i.e. securities, derivative or commodity, such as stocks, bonds, cash, swaps, futures, foreign exchange options, gas electricity and so forth, or group of items that is traded through matching of counterparty orders (bid, offer).
In a further embodiment of the invention there are more than one trading modules 206, implementing one or more algorithmic trading units.
The input data messages are automatically generated in the application module 204 (for example by a trading module 206) may be generated in response to a data fed to the application module 204. The internal interface 205 may be implemented using a module approach and arranged to receive and transmit data messages, to and from the rest of the computer system 200. By interface is generally meant a point of interaction between components, and is applicable at the level of both hardware and software. This allows a component, whether a piece of hardware or a piece of software, to function independently while using interfaces to communicate with other components via an input/output system and an associated protocol. In particular the internal interface 205 transmits input data messages comprising new, altered or cancelled orders and or quotes to the matching modules and to receive data relating to price, volume and the like associated with different financial instruments traded in the computer system 200. In accordance with one embodiment of the invention, the internal interface 205 also acts as a validation module, arranged to validate all data generated by the trading modules 206 of the application module 204 and transmitted into the computer system 200 and in particular the matching module 203. Hereby it is possible to prevent invalid messages from enter the matching module 203 when generated in the application module 204.
The computer code associated with the different trading modules 206 can be provided by a party, external to the proprietor of the system 200. Thus, in an example embodiment of the invention, while the computer system 200 is hosted and run by as an electronic automated exchange system 104, the code in a trading module 206 may be provided, as a trading algorithm, from an external participant, trading within the computer system 200. The algorithmic trading unit 105 can then be implemented in the trading module 206 and plugged-in to the system via the application module 204, for example as a so-called binary plug-in. Parameters and settings of computer code of the module 206 can be altered, either automatically in response to data in particular market data such as price, volume etc., received from within the system 200 via the interface 205, or via the external interface 207. Parameters and settings can also be altered via an external command message, received via the external interface 207. This will be explained in more detail below.
In accordance with one embodiment the trading modules 206 are plug-in modules that easily can be removed from the module 204. Hereby it is possible to change the complete software algorithm running in a module 206 with a minor of interruptions.
In
It should be noted that in the description above the term “comprising” does not exclude other elements or steps and “a” or “an” does not exclude a plurality. Furthermore it should be noted that the terms “include” and “contain” does not exclude other elements or steps. The present invention is not limited to the above-described preferred embodiments. Various alternatives, modifications and equivalents may be used. Therefore, the above embodiments should not be taken as limiting the scope of the invention, which is defined by the appended claims.
