Prime Match: A Privacy-Preserving Inventory Matching System

• URL: http://arxiv.org/abs/2310.09621v1
• Date: Sat, 14 Oct 2023 17:03:44 GMT
• Title: Prime Match: A Privacy-Preserving Inventory Matching System
• Authors: Antigoni Polychroniadou, Gilad Asharov, Benjamin Diamond, Tucker Balch, Hans Buehler, Richard Hua, Suwen Gu, Greg Gimler, Manuela Veloso,
• Abstract summary: In the financial world, banks often undertake the task of finding such matches between their clients. If no match is found, the parties have to buy or sell the stock in the public market, which introduces additional costs. We provide a solution, Prime Match, that enables clients to match their orders efficiently with reduced market impact.
• Score: 15.320275576536854
• License: http://creativecommons.org/licenses/by/4.0/
• Abstract: Inventory matching is a standard mechanism/auction for trading financial stocks by which buyers and sellers can be paired. In the financial world, banks often undertake the task of finding such matches between their clients. The related stocks can be traded without adversely impacting the market price for either client. If matches between clients are found, the bank can offer the trade at advantageous rates. If no match is found, the parties have to buy or sell the stock in the public market, which introduces additional costs. A problem with the process as it is presently conducted is that the involved parties must share their order to buy or sell a particular stock, along with the intended quantity (number of shares), to the bank. Clients worry that if this information were to leak somehow, then other market participants would become aware of their intentions and thus cause the price to move adversely against them before their transaction finalizes. We provide a solution, Prime Match, that enables clients to match their orders efficiently with reduced market impact while maintaining privacy. In the case where there are no matches, no information is revealed. Our main cryptographic innovation is a two-round secure linear comparison protocol for computing the minimum between two quantities without preprocessing and with malicious security, which can be of independent interest. We report benchmarks of our Prime Match system, which runs in production and is adopted by J.P. Morgan. The system is designed utilizing a star topology network, which provides clients with a centralized node (the bank) as an alternative to the idealized assumption of point-to-point connections, which would be impractical and undesired for the clients to implement in reality. Prime Match is the first secure multiparty computation solution running live in the traditional financial world.

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