Exotic Trading Systems from

Exchange Lab

With the explosion of trading over the Internet, the public’s interest in electronic trading has taken many forms. This includes equities trading, auctions, and even forms of wagering (which, after all, is simply an extension of today’s stock markets). Exchange Lab is a provider of technology for new and exotic forms of trading.

One problem in many of today’s trading environments is the isolation of pools of liquidity. For instance, if one wants to buy or sell a NASDAQ stock, one typically deals with a market maker who maintains a position in that stock. But there are typically other market makers who may have better prices. Likewise, bidding on an item on eBay ignores other auction markets that may be handling that same item.

A major Exchange Lab technology solves this liquidity problem by letting an order be represented simultaneously in multiple markets, even though these markets may behave quite differently. Some may be markets that match an order against a book, others may be auction markets, periodic match markets, negotiation markets, and so on. Facilities and features are provided to allow the markets to efficiently cooperate with the trader and with each other to insure that an order is executed only once.

The technology for this trading environment is provided as a set of standard systems that can be configured to the specification of the various traders and markets in the network and that can be run on any platform from NT and UNIX to Compaq’s Himalaya and Alpha systems. Reliability, recovery, and performance are imperatives for this design.

The Sombers Group has been active in the development of this technology for Exchange Lab, from systems architecture through performance modeling and reliability analyses to implementation.

Another example of Exchange Lab technology is a system for trading futures on numbers. One use for such a system is as a hedge for producers and consumers, such as next summer’s weather for farmers or a play’s success for its investors. Another use is for wagering on the total score or score spread for sporting events.

The Sombers Group was retained to build an NT-based prototype of this system to demonstrate its functions and feasibility. Based on the success of this demonstration, this system is now being deployed by others in Ireland to serve the UK, Australian, New Zealand, and other markets where Internet wagering is legal and encouraged.