Cryptographic Rule-Based Trading - (Short Paper)

We present an interesting new protocol where participants in a securities exchange may submit cryptographically encrypted rules directly to an exchange rather than orders to buy and sell. We define this in two parts: a secure, partially trusted computer that runs the exchange and proves its actions correct, and a set of participants who define the rules and submit them to the exchange. At each “tick” of the exchange, market prices are taken from the national market system, all submitted rules are evaluated, with any resulting trades executed at market prices. Cryptography reduces information leakage, masks participants’ intent, and provides for verification. A cryptographic audit trail proves that all transactions executed by the exchange are according to a set of published exchange rules and the encrypted trading rules.