Smart Order Routing (SOR) is an automated order processing mechanism, designed to take the best available opportunity across a variety of different trading platforms.
The rise in the number of different trading platforms and multilateral trading facilities (MTFs) contributes to a surge in liquidity volatility as the same asset is exchanged in multiple venues, causing the price and quantity to vary between each platform. SOR helps to counter, or even gain, from liquidity fragmentation. SOR is carried out by smart order routers, systems designed to analyse the state of the venues and position orders in the best possible way to achieve the best ask/bid prices.
Smart Order Routing in Crypto Exchanges
Before the current routers started gaining attention, Direct Order Turnaround or DOT were the original versions of Smart Order Routing. However, it could only guide orders to one destination within the institutional buy-side. Exchanges would have to manually search and compare data from different venues on their own.
However, in 2007–2008, smart order routers started to gain widespread attention in Europe, with the primary goal for capturing liquidity at various venue. The SOR systems were enhanced and this helped exchanges to cope with high-frequency trading, enjoy reduced latency and incorporate smarter algorithms. After its spike in popularity, SOR improved the overall efficiency of order routing by choosing the most suitable execution prices.
The implementation of SOR enables exchanges to get the best prices from multiple market platforms automatically, hence optimizing the best outcome of all trade orders and drastically reducing the need for exchanges to source for prices manually.
Nexus 2.0 Crypto Smart Order Routing for Exchanges
NEXUS 2.0 is a next-generation liquidity aggregation engine developed by Broctagon Fintech Group. Powered by SOR, NEXUS 2.0 bridges the worlds of forex and crypto with its proprietary universal FIX API adaptor that aggregates price quotes from top Digital Asset Exchanges and Prime of Prime (PoP) brokers.
Broctagon’s proprietary NEXUS 2.0 liquidity aggregator combines price quotes from top crypto exchanges such as Huobi and Binance directly into exchange orderbooks.
Upon trade confirmation, orders are automatically allocated to the best-priced exchange through real-time/net position STP (Straight Through Processing) functionality to ensure instant communication between relevant counterparties.
What this means for exchanges is that their traders will effectively trade across multiple exchanges through a single avenue. They will have round-the-clock access to the fairest trades at the best market prices, regardless of illiquid market circumstances.
With our smart order routing technology, discover how we can elevate exchanges to be instantly competitive against the world’s top crypto exchanges.
For more information on NEXUS 2.0 and Broctagon’s offerings, head to https://broctagon.com/nexus/