Towards Multi-Attribute Double Auctions for Financial Markets

Technological progress has led to electronic exchanges attracting a major part of transaction volume for standardized stocks. In the field of derivatives and bonds, electronic exchanges failed to prosper and so called over-the-counter (OTC) trading is predominant: possibly because multi-attribute assets are hard to trade in structured two-sided markets. The present paper aims at alleviating this shortcoming. The present work follows the market engineering approach and presents a class of double auction mechanisms that is able to handle multiple attributes – the inherent potential of these mechanisms can be utilized in additional products to reduce search and coordination costs by equating supply and demand centrally. The mechanisms are individually rational, Pareto optimal, coalition proof and budget-balanced. As a proof of concept and to illustrate feasibility, the mechanisms are implemented in the meet2trade system.