Trading exchanges: Prospects and ways of evolution in the XXI century

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Alexander Belov   Contributor

Trading exchanges: Prospects and ways of evolution in the XXI century

The first attempts to create a platform for carrying out trade operations between those wishing to exchange one product for another appeared about 700 years ago. Even then, it became apparent to some business people that there was a need to create a place to meet, communicate, and discuss trade and prices. However, the first exchange, as close as possible to today's understanding of such a market concept, appeared in Belgium at the beginning of the 15th century. The Van der Beurze family organized meetings of merchants from all over Europe, who negotiated trade transactions and used IOUs (promissory notes) as a settlement instrument.

This idea was liked by traders and entrepreneurs, and soon the first stock exchange in the Netherlands appeared, on which such a financial instrument as stocks appeared for the first time. And the first to offer their stocks for sale were East India Company and West India Company.

How classic exchanges work

Four centuries have passed since then, and there are hundreds of commodity and stock exchanges in the world. All of them work according to the standard technology tested over the years. In which the broker records buy and sell trades, which are executed when a price that is satisfactory for both parties to the trade is reached. In addition, a mandatory attribute of every exchange is the presence of trading pairs, which are formed by the underlying and quoted assets. Using the example of an exchange where 3 futures of Dow Jones, NASDAQ, and S&P 500 indices are available, and three trading pairs: DJUA/USD, NASDAQ/USD, and S&P 500/USD, the dollar will be the quoted currency, since it measures the price of underlying assets — futures. 

This approach limits traders who want to exchange, for example, NASDAQ futures for the S&P 500, when the site does not support such a pair. In this case, the user will have to exchange NASDAQ for USD in order to buy S&P 500 for USD later, losing more time and paying a double commission.

But all exchanges work according to this principle, including cryptocurrency ones. Despite the fact that in recent years new decentralized exchanges (DEX) have appeared, in which there is no intermediary role, and all transactions are processed automatically in p2p, the format of trading pairs remains the same. And only deals on one pair are recorded in one order book. What problems can there be? Firstly, this is a real limitation for traders, which leads to wasted time and additional funds on commission. Secondly, the exchange calculates the liquidity for each pair separately, and if it is low, your order runs the risk of remaining in the order book for a long time.

But more recently, it became known about the invention of a completely new technology for forming an order book that allows you to trade any cryptocurrency without fixed trading pairs. For the first time, a new trading core was implemented on the exchange.

Nick Price has been working for several years to create a technology that allows trading any asset on the exchange for any other. And in 2018, the team launched the exchange with the Any2Any quantum trading core technology.

Since 2019, the exchange has been working on the final version of the Any2Any core. Currently, 38 assets are traded in 1406 trading pairs on According to the inventor, the potential of Any2Any allows trading hundreds of assets in hundreds of thousands of trading pairs.

How the Any2Any trading core works

The trading core is the software component of an electronic exchange. It matches up bids and offers to complete trades. Matching engines use one or several algorithms to allocate trades among competing bids and offers at the same price. The database server sorts the limit orders and enters them into tables - order books. In the classic trading core, the order books of the trading pairs are not interconnected.

In the Any2Any trading core, traders' orders are collected in one graph. In mathematics, a graph is a set of vertices connected by edges. Any2Any combines trade orders in all assets into a stable market graph. In a stable market graph, the liquidity vectors (order volumes) are balanced.

Let's compare the work of the classic matching engine and Any2Any trade core. To do this, we will present a classic order book as a graph. The vertices of this graph will limit orders of one trading pair.

In the upper part of the graph of the classic core, there are sell orders, and in the lower part, buy orders. Take order - the vertex in the center of the graph. The classic trading core always executes a deal through the nearest graph vertex.

Any2Any graph vertices are all trade orders. A new trade order adds a new liquidity vector to the graph, which can disrupt the stability of the graph.

Any2Any quantum trading core analyzes the current state of the graph and determines which vectors need to be removed to balance the market graph. From these vectors, the core forms a closing graph - a trading quantum. Then the core removes the quantum vertices from the general market graph and rebuilds the remaining vectors, which again brings the market graph to a stable state.

A take order is executed taking into account all available liquidity for the transaction currency, and the trader receives the cryptocurrency at the most favorable price. At the same time, he does not pay an additional commission for the execution of orders from a trading quantum. Other traders whose orders were in the quantum also get their orders executed.

“All available liquidity within the trading core is in a state of 'superposition': it is not known for which market transactions the liquidity will be used in the future. When a trade order enters the market graph that violates the graph stability, the superposition collapses into the final transaction graph. The final transaction graph is subtracted from the market graph in a single quantum ", — Nikolay Price, founder of Exchange.

What are the advantages of the new trading core?

In fact, both the classical and the alternative trading core any2any perform a single task: the exchange of one asset for another. However, as described above, any2any has a number of advantages, including:

  • High liquidity. The trading core takes into account the liquidity of all trading pairs, so traders' deals are executed at the best price;
  • Low volatility. Thanks to high liquidity there is less noise on the chart;
  • Low fees. The trader does not pay double commission when exchanging cryptocurrencies. The exchange commission for a deal is 0.1–0.2%, regardless of the number of orders of other traders that led to the execution of the deal;
  • Real ratio of asset prices. The classic trading core charts show the course of a part of the market - a trading pair. Any2Any technology displays the real market prices of cryptocurrencies relative to each other.

Asset price charts on the platform have some peculiarities. The trading pair chart displays the actual price change taking into account all other transactions on the exchange, but at the same time, it shows the volumes of only this trading pair. Because of this, some charts look like the price changes without trading volumes.

The future of the market or a pilot project? 

Despite the fact that the technology of the quantum trading core is absolutely unique, and has not yet been used on other exchanges, everyone can appreciate its undeniable advantages. The Any2Any trading format takes traders' capabilities to a completely new level that was previously unavailable. 

If the team continues to work on new technology, developing and refining it, in a few years the market may see this as a major development direction, the advantages of which far exceed the disadvantages. If this happens, Any2Any technology will reduce market noise on trading exchanges and reduce opportunities for price manipulation.

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Alexander Belov   Contributor

Alexander Belov is a writer specialized in Blockchain and decentralized finance field. In 2020 he was included in the list of the top 30 most Influential People In Blockchain Industry by Hackernoon.