| Rapid advances of information technology are reshaping the organization of the financial services industry. With the tremendous growth of Internet trading, organized financial exchanges face a great challenge to provide an efficient marketplace for investors all over the world. They will soon realize that they cannot be a natural monopoly forever and have to operate and compete like any other businesses. If the existing exchanges do not innovate and offer efficient mechanisms to customers, they will lose their business to competitive markets that have more efficient mechanisms.; The purpose of this study is to develop an alternative financial trading system based on economic principles and cutting edge information technology. This study presents a framework in analyzing today's financial services industry and studies a number of the most important and innovative financial markets in the world. The focus of the dissertation is on the design of a bundle trading mechanism and the implementation of an electronic market with the new market mechanism. In financial markets, a bundle can contain a combination of stocks or other financial instruments such as commodities, interest futures, options, bonds, or foreign currencies. Traditional auction mechanisms in financial markets only allow trading in single assets while the bundle mechanism is able to match bundle orders and provide a price discovery mechanism for the bundle as well as for individual assets that form the bundle. The electronic market was implemented based on Java and distributed object technology. Computational issues such as distributed system architecture, system implementation, and distributed object model are discussed. We tested the system over the Internet for a period of three weeks and the system performed efficiently. |
