Abstract
In lit markets, all the information about bids and offers in the order book is visible to the public. With this transparency, traders can discover prices and adjust their strategies accordingly. On the other hand, submitting a bulk order by a financial institution will have a significant impact on the market price. Therefore, financial institutions prefer trading on dark pools, which hide order books, to avoid potential losses from negative market impact. However, the lack of transparency hurts price discovery, results in poor execution of trades, and promotes illicit behaviors such as front-running. Hence, several financial regulations have limited trading on dark pools. Subsequently, periodic auctions, which are considered regulation-compliant alternatives to dark pools, have witnessed a surge in trading volumes. Unfortunately, similar to dark pools, there are no guarantees that the operators will neither exploit their exclusive access to the order book nor incorrectly compute the market-clearing price. In this paper, we build a publicly verifiable and secrecy preserving periodic auction protocol to address these challenges. We utilize aggregate Bulletproofs to prove the ordering on a vector of commitments. To alleviate the burden on traders’ computation resources and achieve public verifiability, the protocol delegates the verification of the operator’s work to a smart contract. We evaluate the protocol’s performance, and the results show that it is practical and feasible to deploy.
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Appendix A Smart Contract Pseudocode
Appendix A Smart Contract Pseudocode
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Galal, H.S., Youssef, A.M. (2021). Publicly Verifiable and Secrecy Preserving Periodic Auctions. In: Bernhard, M., et al. Financial Cryptography and Data Security. FC 2021 International Workshops. FC 2021. Lecture Notes in Computer Science(), vol 12676. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-662-63958-0_29
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DOI: https://doi.org/10.1007/978-3-662-63958-0_29
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