Developing a new trading technology is one thing. Getting it patented is quite another.
After almost four years of trying, Royal Bank of Canada's securities division received a U.S. patent for a trading system designed to make it harder for high-frequency traders to figure out what other investors are doing.
RBC's THOR smart order router received a patent for "Synchronized Processing of Data by Networked Computing Systems," the bank said Thursday. The patent application was first filed in December 2009.
THOR is designed to thwart HFT strategies that try to exploit differences in arrival times at different stock markets. Some routers, known as spray routers, try to find the best price on a stock by sending orders to many different stock markets at once. But because of differences in the time it takes the orders to arrive (known as latency), a cagey trader on the other side with a good computer could spot orders arriving at one market and guess that more will arrive a fraction of a second at other markets. THOR is designed to offset that by delaying some orders travelling through fast connections a short period of time so the arrivals at all markets are synchronized. RBC said that since THOR's launch in 2010, it has consistently managed to fill all the orders sent through the system, a sign that it is working.
RBC is still seeking patents in Canada, Australia and the European Union.
(Boyd Erman is a Globe and Mail Reporter & Streetwise Columnist.)
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