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Latency Optimization

This is the summary of analysis conducted for client for Ultra Low latency trading platform implementation.

Latency is the key factor in financial transactions. Latency affects the time between the initiation of a transaction and its execution. Any latency between initiation of trade and the match of the buy/sell to an appropriate sell/buy order provides an opportunity for the price to make an unfavorable change. Additional latency can literally cost money.

High Frequency trading (HFT) is the common mechanism by which large numbers of small transactions are placed to capitalize on small variation in stock price.

Ultra-low latency solution high lights on main three areas to achieve low latency in microsecond

• Transmission Delay
• Network Delay
• Computational Delay

Transmission delay ( Long Distance Delay) can be handled by colocation service by exchange or listed vendors by the exchange.

The factor of closeness to the stock exchange matching engine provides co-located trading members with an advantage of being the first recipient of the market data and being among the first to place orders.

Exchange colocation service or the colocation service vendors provides order connectivity and market data connectivity on 1 Gbps port.

Further optimization needed on network layer. In global market of Finance technology main areas of HFT & ULL , Network services are based on below criterias:

• Optimized latency and path connectivity
• High speed, Layer 2 connectivity up to 10 Gbps
• Copper or fibre hand-off at native interface speed

To handle computation delays while running trading smooth it is recommended that to go for programming language which has Standard Template Library (STL) , high performance data structure & algorithms ( Like C++ ) in combination with python(NumPy/SciPy/Pandas) for high volume data analytics.

Following Programming Toolkits will be considered:

• Caching (Trading Situation)
• Dynamic Memory Allocation /de-allocation
• Garbage Collection
• Parallelization (Concurrency/multithreading)
• Scalability (Message Queue and stacks)
• Hardware and OS Selection

For exchange connectivity with low latency it is always recommended to go for binary/native protocol. FIX Protocol will add additional latency so better to avoid in case of HFT solution

Based on above analysis, a Tick to order latency of around 10 – 12 micro sec can be achieved (with FPGA further 2-3 micro sec can be reduced) (since many other parties are involved, tick to trade latency is difficult to control and hence the mention of tick to order).

If you have any requirements for FIX protocol-based solutions for Electronic Trading, do not hesitate to contact +91-20-49007800 or email- sales@fixsol.com