Exchange Market for Combinatorial Orders

1
Exchange Market for Combinatorial Orders
Jenny Y. Hu
Committee Eugene Fink Dmitry B. Goldgof Sudeep
Sarkar
2
Motivation

• Build an automated
• exchange for trading
• goods and services

3
Motivation

• Build an automated
• exchange for trading
• goods and services

• Combine the speed
• and liquidity of the
• stock exchange

4
Motivation

• Build an automated
• exchange for trading
• goods and services

• Combine the speed
• and liquidity of the
• stock exchange with
• the flexibility of eBay

5
Outline

• Previous work

6
Outline

• Previous work
• Complex exchange
• Data structures

7
Outline

• Previous work
• Complex exchange
• Data structures

Josh
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Outline

• Previous work
• Complex exchange
• Data structures
• Price and quality functions
• Combinatorial orders

Josh
9
Outline

• Previous work
• Complex exchange
• Data structures
• Price and quality functions
• Combinatorial orders

Josh
Jenny
10
Outline

• Previous work
• Complex exchange
• Data structures
• Price and quality functions
• Combinatorial orders

Josh
Jenny
11
Previous Work

• Combinatorial auctions
• Standardized exchanges

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Combinatorial Auctions

• Complex commodities
• Asymmetry between
• buyers and sellers
• Illiquid
• Examples
• OptiBid, SBIDS, eMediator

13
Standardized Exchanges

• Simple commodities
• Symmetry between
• buyers and sellers
• Liquid
• Examples
• Stocks, Futures

14
Outline

• Previous work
• Complex exchange
• Data structures
• Price and quality functions
• Combinatorial orders

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Complex Exchange

• Market
• Orders
• Fills

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Market
All items that can be traded form a market.
Example All conceivable vehicles compose a car
market.
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Orders
An order is a subset of the market along with a
price limit.

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Buy and Sell Orders
Price
Sell order
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Buy and Sell Orders
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Fills
Buy order Any Color Sports Car 36,000
Sell order Silver Limo 50,000 or Red Mustang
32,000
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Implemented Exchange System
Specific sell orders.
Good Sell a red Mustang, made in 1999.
Bad Sell any color Mustang, made before 1999.
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Implemented Exchange System
Price
Price
Buy order
Sell order
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Implemented Exchange System
Sell order
Price
Buy order
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Outline

• Previous work
• Complex exchange
• Data structures
• Price and quality functions
• Combinatorial orders

25
Main Structures

• Tree of sell orders
• List of buy orders

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Tree of Sell Orders
Model
Corvette
Mustang
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Tree of Sell Orders
Model
Corvette
Mustang
Color
Color
Red
Black
Grey
Red
White
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Tree of Sell Orders
Model
Corvette
Mustang
Color
Color
Red
Black
Grey
Red
White
Year
Year
Year
Year
Year
1996
Red Mustang made in 1996
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Tree of Sell Orders
Model
Corvette
Mustang
Color
Color
Red
Black
White
Year
Year
Year
1996
Red Mustang made in 1996
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Trading Cycle
Process all new orders
Re-match all old orders
Stop trading?
No
Yes
31
Outline

• Previous work
• Complex exchange
• Data structures
• Price and quality functions
• Combinatorial orders

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Price Functions
The price may depend on an item.
Price
Market
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Price Functions
The price may depend on an item.
Price function I ? Price.
Price
I
Market
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Price Functions
The price may depend on an item.
Price function I ? Price.
Price
Example Buy Toyota Tercel, made after
1998. Price function 10,000 ? 0.1?miles.
I
Market
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Price Functions
The price may depend on an item.
Price
Price
I
Buy order
Sell order
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Price Functions
The price may depend on an item.
Sell order
Price
Buy order
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Quality Functions
The transaction quality may depend on an item and
its price.
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Quality Functions
The transaction quality may depend on an item and
its price.
Price
I
Market
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Quality Functions
The transaction quality may depend on an item and
its price.
Quality
Price
I
Market
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Quality Functions
The transaction quality may depend on an item and
its price.
Quality function I ? Price ? Quality.
Quality
Price
I
Market
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Quality Functions
The transaction quality may depend on an item and
its price.
Quality function I ? Price ? Quality.
Quality
Example Camry for 16,000 is better than Tercel
for 10,000.
Price
I
Market
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Search for Matches
Price
Buy order
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Search for Matches

• Find sell orders with
• matching items

Price
Buy order
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Search for Matches

• Find sell orders with
• matching items
• Select orders with matching prices

Price
Buy order
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Search for Matches

• Find sell orders with
• matching items
• Select orders with matching prices
• Compute their quality

Price
2
1
3
Buy order
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Search for Matches

• Find sell orders with
• matching items
• Select orders with matching prices
• Compute their quality
• Trade with best match

Price
3
Buy order
47
Outline

• Previous work
• Complex exchange
• Data structures
• Price and quality functions
• Combinatorial orders

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Combinatorial Orders

• Disjunctions
• Conjunctions
• Chains
• Nested orders

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Disjunctive Orders
Executing one of several alternative
transactions.
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Disjunctive Orders
Executing one of several alternative
transactions.
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Disjunctive Orders
Executing one of several alternative
transactions.
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Disjunctive Orders
Executing one of several alternative
transactions.
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Disjunctive Orders
Executing one of several alternative
transactions.
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Search for Matches

• Find matches for each element

Price
Market
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Search for Matches

• Find matches for each element

Price
Market
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Search for Matches

• Find matches for each element

Price
Market
57
Search for Matches

• Find matches for each element

Price
Market
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Search for Matches

• Find matches for each element
• Compute their quality

Price
5
3
4
2
1
Market
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Search for Matches

• Trade with best match

Price
5
Market
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Search for Matches

• Trade with best match
• Remove all elements

Price
5
Market
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Search for Matches

• Trade with best match
• Remove all elements

Price
Market
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Conjunctive Orders
Executing several transactions together.
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Conjunctive Orders
Executing several transactions together.
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Conjunctive Orders
Executing several transactions together.
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Search for Matches

• Find matches for each element

Price
Market
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Search for Matches

• Find matches for each element

Price
Market
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Search for Matches

• Find matches for each element

Price
Market
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Search for Matches

• If some elements have no
• matches, do not trade

Price
Market
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Search for Matches

• Compute the quality of matches

Price
2
2
3
1
1
Market
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Search for Matches

• Compute the quality of matches
• Find the best match for each element

Price
2
3
Market
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Search for Matches

• Trade with the best matches

Price
2
3
Market
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Search for Matches

• Trade with the best matches
• Remove all elements

Price
Market
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Chain Orders
Executing several orders in a sequence.
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Chain Orders
Executing several orders in a sequence.
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Chain Orders
Executing several orders in a sequence.
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Chain Orders
Executing several orders in a sequence.
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Chain Orders
Executing several orders in a sequence.
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Chain Orders
Executing several orders in a sequence.
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Chain Orders
Executing several orders in a sequence.
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Chain Orders
Executing several orders in a sequence.
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Chain Orders
Executing several orders in a sequence.
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Chain Orders
Executing several orders in a sequence.
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Nested Orders
We can nest disjunctions.
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Nested Orders
We can nest disjunctions, conjunctions.
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Nested Orders
We can nest disjunctions, conjunctions.
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Nested Orders
We can nest disjunctions, conjunctions, and
chains.
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Main Results

• Extensions to the formal model
• of complex markets

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Main Results

• Extensions to the formal model
• of complex markets
• Semantics of combinatorial orders

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Main Results

• Extensions to the formal model
• of complex markets
• Semantics of combinatorial orders
• Exchange system with price
• functions, quality functions,
• and combinatorial orders

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Future Work

• Short-term (M.S.)
• Fast search for optimal matches (Jianli)
• Live order editing

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Future Work

• Short-term (M.S.)
• Fast search for optimal matches (Jianli)
• Live order editing
• Long-term (Ph.D.)
• Extended sell orders
• Integration with combinatorial auctions
• Distributed broker agents