Optimal market structures based upon mutual satisfaction

The current securities market (as well as many other markets) is highly fragmented among multiple sources of liquidity, virtually all of which utilize archaic market structures and order entry mechanisms for accomplishing trades. This fragmentation leads to excessive price volatility due to information leakage of buyer/seller intentions, and necessitates inefficient strategies for accomplishing large trades. As a result, liquidity in the underlying security is constrained by the reluctance of potential market participants to disclose their willingness to trade. We present a fundamental innovation in market structure based upon a fuzzy representation of trading satisfaction, with transactions determined by the optimization of mutual satisfaction among all possible combinations of buyers, sellers, prices and amounts. This new market structure is currently being implemented for large-scale trading in U.S. equities.