The Design and Development of a Financial Cybermarket with a Bundle Trading Mechanism

Ming Fan, Jan Stallaert, and Andrew B. Whinston
International Journal of Electronic Commerce,
Volume 4, Number 1, Fall 1999, pp. 5.

Abstract: Fundamental changes are taking place in the world’s financial markets that will challenge stock exchanges. As the twenty-first century approaches, more and more exchanges are adopting automated floorless trading mechanisms. This article outlines an attempt to develop an automated financial cybermarket with a bundle-matching and -execution mechanism. The market matches orders in bundles and provides a price-discovery mechanism. In many real-world situations, value is derived from a combination of assets or resources. The value will be significantly reduced when even one asset or resource is excluded from the bundle. The mechanism can be used to trade financial portfolios as well as a combination of commodities. When used for simple asset trading, the bundle mechanism is, in effect, a generalization of the k-double auction. From a computing point of view, the electronic market is a large-scale distributed computing system. Emerging technologies like Java and distributed objects can be used to create electronic markets that can be accessed universally. The technologies support interactive and dynamic information exchanges between traders and market. Computational issues, such as asynchronous processing, currency control, and scalability, are also addressed.

Key Words and Phrases: Bundle trading, distributed computing, double auction, financial markets, Java.