Method and system for message consolidation

(54) Title: Device and procedure in an electronic trading system (56) Publications cited: - (47) Summary:

The invention relates to a method and a trading system (10) for consolidating (32,36) messages (14) in intermediate server storage (16). It operates in At least one of a data and telecommunications network (12). The invention introduces message (14) distribution by collecting and distributing them via retention timeframes. Thus, the invention eliminates transaction administration extensions and creates a substantial gain in terms of message (14) throughput in the trading system (10).

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Summary

The invention relates to a method and a trading system (10) for consolidating (32, 36) messages (14) into intermediate server layers (16). It operates in at least one of a data and telecommunications network (12). The invention introduces message (14)

distribution by collecting and distributing them via retention timeframes. Thus, the invention eliminates transaction administration add-ons and creates a substantial gain in terms of message throughput (14) in the trading system (10).

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Technical area

The present invention relates to a method and system for consolidating messages in a trading system operating in at least one of a data and telecommunications network.

The prior art

An exchange or other financial institution or organization that provides a marketplace for trading often provides its service using an e-commerce platform. Modern electronic trading systems are often implemented as a three tier layer model, including back-end servers, intermediate servers and trade application programs.

Market participants connect to the stock exchange's trading platform using a trading application program that is either an application program provided by the stock exchange or more often a proprietary application program that is integrated with the actors' internal systems.

Trading servers typically provide services such as processing order requests, order matching, trade capture, payment and settlement. Very often, not all trading functionality is contained within a server, but rather distributed over a set of physical servers.

The intermediate server store handles the connectivity of the trading application programs.

The received incoming request is sent to the appropriate back-end server depending on the request. The intermediate layer is also responsible for feeding back information updates to the trading application programs.

In a typical message flow, the trading system receives updates from trading application programs, places these updates on the central servers, and then spreads the updates to all trading application programs.

Players in an electronic market are financial institutions such as banks, brokerage companies and market guarantee companies. They trade either on behalf of an end customer or for their own part, ie for their own account. Matching processing is run by the players submitting orders and price information in the "market". Orders are often submitted as a result of an end-user user asking an operator to act as an intermediary.

Market guarantee companies have an obligation to “guarantee a market”, ie they provide liquidity by almost always providing bids and quotations. They change their prices in the market due to their confidence in the market and other market factors such as market news, their position and other underlying financial factors that change.

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A major challenge for all stock exchanges is to provide a well-performing and reliable trading system. Each order and price information event requires a large number of processing steps to ensure that the order or price information is processed in a safe, reliable and consistent manner. The overall problem is that incoming orders and price information must be received over the network, synchronized with the rest of the order flow, reviewed and recovery logged etc.

Summary of the Invention

The present invention describes how the matching processing of orders and price information in an electronic market can be significantly improved by consolidating order and price information flows.

In order to achieve its aims and objectives, the present invention provides a method that consolidates messages in a trading system operating in at least one of a data and telecommunications network. Hereby, the present invention comprises the following method steps:

messages are consolidated at a consolidation point in a server warehouse, whereby the messages are aggregated into multiple concatenated predetermined hold-back time frames; and the messages consolidated in the timeframes are transmitted for processing when a timeframe has elapsed, thus eliminating transaction administration extensions and creating a significant gain in message processing throughput time in the trading system.

One embodiment of the present invention comprises multiple connected intermediate servers, each of which has the consolidation point.

In another embodiment, the retention time frames are self-adjusting in terms of a threshold value for the intensity of the message traffic to the server layer.

Yet another embodiment involves multiple server layers forming a tree-like structure, with each layer relieving the workload of a next layer in a message distribution chain prior to processing.

The present invention further provides a trading system that consolidates messages in at least one of a data and telecommunications network. Accordingly, the invention comprises:

a consolidation point for the messages in a server warehouse, whereby the messages are collected in multiple concatenated predetermined retention timeframes; and a transmitter application program, which transmits the messages consolidated in the processing timeframes when a timeframe has elapsed, thus eliminating transaction administration extensions and creating a significant gain in message processing throughput in the trading system.

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The system of the present invention also provides the embodiments of the above method steps via their attached independent claims.

Brief description of the drawings

Hereinafter, the present invention is described together with the accompanying drawings for a better understanding of its embodiments and given examples, in which:

Figure 1 illustrates a conventional prior art trading system:

Fig. 2 illustrates that a delay in distributing a batch consolidation in accordance with the present invention is directly linear with how efficient the batch would be; and

Fig. 3 illustrates a tree-like trade consolidation in accordance with one embodiment of the present invention.

Detailed description of preferred embodiments

Consolidation of order and price information flows is an object and objective of the present invention. Some exchange operations such as synchronization, receiving data over a network, securely storing information to a disk, and similar operations have a relatively high fixed cost of resources, which is not linear with the amount of information being processed. For example, when writing data to a disk, most of the time is spent finding the location on the disk where the information could be stored; The actual transfer of trade information has thus lost its importance, although it is the main task.

If multiple orders and price information in a trade application program could be received as a single batch, the processing cost per order and price information could be reduced due to the fact that the cost of some of the processing steps mentioned earlier is non-linear. In order to consolidate order and transaction flows, there must be a consolidation point where incoming orders and price data are processed batchwise. This could be achieved at several places.

Figure 1 illustrates a conventional prior art trading system 10 which can be modified to achieve the objects and objectives of the present invention. The trading system 10 includes a network 12 for data and / or telecommunications where the trading application program 14 transmits order requests, order matching, agreement, payments, settlements and similar personal data. These transfers are received at intermediate servers 16 for further transfer to a trading server 18.

An exchange or other financial institution that provides a marketplace for trading often provides its service using an e-commerce platform. Modern electronic trading systems are often implemented as a three-layer storage model: back-end servers, intermediate servers and trade application programs.

In addition, a stock exchange manages the back-end system and the middle servers. Market participants join the stock exchange platform using a trading application program which is either an application program provided by the stock exchange or another

528 217 financial institution or more often an in-house application program that is integrated with the actors' internal systems.

Trading servers typically provide services such as processing order requests, order matching, agreement, payment and settlement. Very often, not all trading functionality is contained in a server; rather, it is distributed over a set of physical servers.

An intermediate server layer handles the connectivity of the trading application programs. Received requests are sent to the appropriate back-end server depending on the request. The intermediate layer is also responsible for feeding back information updates to the trading application programs.

In a typical messaging flow, the trading system receives updates from trading application programs, places these updates on the central servers, and then distributes the updates to all trading application programs.

The market guarantors are actors in a system and they are obliged to provide a “market”. The market guarantees ensure that the market is liquid, ie that there is a buying and selling interest. There is some type of financial incentive for the market guarantees to guarantee a market.

A simple approach would be to allow operators to submit multiple orders and price information in a single request. This would reduce the number of transactions to a certain extent, but the fact that the trading world is made up of a large number of players would make consolidation limited.

A more efficient place to perform a consolidation in accordance with the present invention would be to provide the consolidation at the intermediate server 16 layer. This is because the order and the price information are collected at this warehouse. According to the present invention, the intermediate server applies a hold before sending an order or a price information to a central matching processing. If other orders and price information arrive at the intermediary server while the retention is in effect, these orders and price information will be added to the order and the price information set.

In Fig. 2, a diagram 20, with time on the x-axis and batch size on the y-axis, is shown schematically that the price paid to consolidate orders and price data is delayed before the order and price data are processed, since they are held to build up sets of orders and price information in accordance with the present invention. The delay is directly linear with the efficiency of the batch treatment, the longer the retention the better consolidation. Accordingly, the present invention introduces a retention timeframe in which a batch of incoming trade application programs 14 is built up for transfer to a final matching processing 40, see Fig. 3.

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When a retention period for a timeframe expires, an entire order and price set is sent to the match processing 40, such as a single large trading transaction.

With the approach of consolidating the order and price information flow outside the trading server 18, the matching processing reduces the workload in the matching processing.

Referring now to Fig. 3, which schematically shows a tree-like configuration for a trading system 30 in accordance with the present invention. This system introduces several layers of consolidation points 32, 36 which are, for example, in intermediate servers 16. Each layer of intermediate servers 16 consolidates and relieves the workload for the next layer.

In Fig. 3, messages from trade application programs are transmitted to a first consolidation point 32 in an intermediate server 16 at operator locations, where they are collected during the first time interval and sent as batches 34 to the next consolidation point 36. At consolidation point 36, batches 34 are consolidated into a second batch 38 and sent to a matching processing 40 for orders and price information in, for example, a trading server 18.

The price paid to consolidate orders and price information is delays before an order and a price information are processed because they are retained to build up sets of orders and price information.

The delay is directly linear with the efficiency of the batch processing, the longer the retention, the better consolidation as shown in Fig. 2. Factors to consider when determining the retention timeframe is that orders and price data do not remain to such an extent that their prices become outdated, and that orders and pricing data is processed within a reasonable time from an operator's perspective. The players' perception must be that orders and price information are processed without delay. Retention must be set to a value that leads to effective consolidation. Retention is self-adjusting in one embodiment of the present invention. If very few orders and price data are processed, there is no need to consolidate the flow, the matching processing can handle the flow. If the order flow increases, the retention time will increase to create a consolidation of the order and price information flow.

A predetermined threshold value or several different threshold values ​​for what is considered from few to many orders and price data form the basis for a dynamic and self-adjusting approach for setting the first time interval via a hold timer. The number of retention timers and bearings in the tree-like structure depends on many parameters specific to each marketplace such as the number of members, order and price flow rates, and other known parameters. There is normally no dependency between consolidation points in different layers or between retention timers.

From a matching perspective, each consolidated 34, 38 batch is treated as a single transaction. The advantage is that the consolidated statement is read as a single message instead of multiple messages, the consolidated statement is written to the review and

528 217 recovery file as a single transaction, and the lock in the match processing is done only once for each batch instead of each order and price information.

From a conformity and reliability point of view, matching processing 40 handles the consolidated order and pricing information set as a single transaction. If the match processing is terminated abnormally, all orders and price information in the kit will be left untreated or processed.

Example:

Suppose a matching processing processes 100 transactions per second. This means that the time to process a single transaction is 10 ms. Make sure that the different steps in the treatment are divided into:

1) reception over the network 0.5 ms

2) locking and synchronization 0.05 ms

3) logging the transaction to the transaction log for recovery purposes 4.95 ms

4) processing the transaction 3 ms

5) send out changes in prices that the transaction results in to the operator world 1 ms

6) send the reply back to the person requesting the transaction 0.5 ms

If these 100 transactions are consolidated into a single transaction at a pre-consolidation point in accordance with the present invention, the following optimization would be achieved, the processing of each sub-transaction would remain the same ie 3 ms. Steps 1, 2, 3, 5 and 6 would basically only be performed once for each of the 100 partial transactions when treated as a single transaction. Suppose a doubling of the bets would result in 14 ms for all 100 partial transactions, ie 0.14 ms per transaction. This gives a total cost of 3.14 ms per transaction. A matching engine could then process 318 transactions per second.

The present invention has been described through non-limiting embodiments and examples, and thus, the appended set of claims further define embodiments of the invention for those skilled in the art.

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