Zeequent Batch Auctions: Providing Transparency and Fairness with Zero Knowledge Proofs

Frequent batch auctions (FBAs) have been proposed as an alternative to traditional limit order books for trading securities. The motivation is to mitigate the predatory advantages of high-frequency traders (HFTs). With FBAs, a double-sided auction is held over a short interval (e.g., 1 second). All marketable orders submitted during the time window are executed at the same price, and arrival time is not a factor. FBAs are significantly less transparent than continuous-time orderbooks and rely on fully trusted specialists or exchanges to execute orders at the fairest price. In this research, we apply the cryptographic concept of zero-knowledge proofs (ZKPs) to develop a zk-FBA which enables the specialist to prove trades are executed fairly without revealing any of the orders directly. Our zk-FBA is implemented using modern ZKP techniques: as a custom zk-SNARK. (Full 5-page paper will be uploaded soon)