Key Advantages

Introduction

Through the dual benefits of synchronous matching and synchronous strategies, synchronous markets eliminate the extraction that plagues their asynchronous counterparts.

Synchronous Strategies

Algorithmic trading by bots has become the primary driver of market activity, accounting for over half of retail volume. Institutional and professional adoption percentages are much higher.

Synchronous strategies resolve a variety of the risks of algorithmic trading by removing the execution and infrastructure vulnerabilities found in asynchronous markets.

Structural Advantages over Asynchronous Trading:

• Neutralizing Latency: Traditional algorithmic trading rewards those with the fastest hardware and closest proximity to the venue. Synchronous strategies internalize the bots within the market structure, removing the infrastructure-based “latency arms race” entirely.
• Mitigating Execution Risk: Recent exchange outages (e.g., 10/10) highlighted a fatal flaw: when an exchange’s gateway fails, external bots cannot manage positions, resulting in significant liquidations. By deploying trading logic directly to the exchange, traders eliminate the risk of communication failures and ensure continuous, intended operation.

Synchronous Matching

In modern asynchronous markets, orders are processed sequentially. This “first-come, first-served” model creates a speed race where the fastest players (High-Frequency-Traders) capture near-risk-free returns by intermediating between buyers and sellers.

Synchronous Matching eliminates this “speed tax” by processing all buy and sell orders simultaneously. Instead of matching pairs one-by-one, the exchange clears all overlapping orders at a single price: the price that maximizes trading volume. This ensures that the surplus value stays with the traders rather than being extracted by a middleman.

A Practical Comparison

To understand the difference, consider a scenario where two traders have overlapping price expectations for 10 units of a stock (e.g., GOOG).

• Alice (Buyer): Willing to pay up to $10.
• Bob (Seller): Willing to sell for as low as $9.

The Asynchronous Outcome (Sequential)

In a traditional market, an intermediary (HFT) uses superior speed to sit between the two orders:

1. The HFT buys from Bob at his lowest price ($9).
2. The HFT sells to Alice at her highest price ($10).
3. The Result: Alice and Bob both get their “worst case” price. The HFT extracts a $10 total profit ($1 per unit).

The Synchronous Outcome (Simultaneous)

On Synchronicity, Alice and Bob are matched directly in a batch auction:

1. The system identifies the overlap and finds the fair clearing price (the midpoint: $9.50).
2. Alice and Bob exchange the 10 units directly at $9.50.
3. The Result: Alice saves $0.50 per unit, and Bob earns an extra $0.50 per unit. They split the $10 surplus that would have otherwise been lost to an intermediary.