Monday, October 28, 2013

High-frequency Trading and Exchange Technology

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HFT (high-frequency trading) systems operate and evolve at astounding speeds. Moore's law is of little comfort when compared with the exponential increase in market-data rates and the logarithmic decay in demanded latency. As an example, during a period of six months the requirement for a functional trading system went from a "tick-to-trade" latency of 250 microseconds to 50. To put that in perspective, 50 microseconds is the access latency for a modern solid-state drive.

I am also a former and current developer of exchange technology. The exchange is the focal point of HFT, where electronic buyers and sellers match in a complex web of systems and networks to set the price for assets around the world. I would argue that the computational challenges of developing and maintaining a competitive advantage in the exchange business are among the most difficult in computer science, and specifically systems programming. To give you a feeling of scale, the current exchange technology is benchmarked in nightly builds to run a series of simulated market data feeds at 1 million messages per second, as a unit test. There is no such thing as premature optimization in exchange development, as every cycle counts.

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