High Frequency Trading:
Low latency networks for competitive advantage
Focal Point: High Frequency Trading
The TorreyPoint HFT solution offers a range of services including:
- Network architecture, testing and deployment
- Network optimization
- Proximity hosting and co-location consulting
- Trade infrastructure timing and metrics
- Managed NOC/SOC services
- Technology selection and strategic sourcing
The TorreyPoint HFT solution addresses the sources of latency on every layer of the network:
- Application layer—Shared memory, SAN, RMDA, and memory caching
- Transaction layer—Acceleration appliances and low latency vendors
- Network layer—Security appliances
- Interface layer—Proximity and high-speed interfaces
Faster trades translate into customer retention and increased revenues.
Financial trading today is governed by complex algorithms and oriented toward one overriding goal: execute trades faster than the competition. For exchange operators, brokers and trading firms, the winners and losers in this so-called high-frequency trading (HFT) are separated by increasingly small time intervals—often in microseconds. As an example, the round-trip time taken to process and acknowledge an order is now under 200 microseconds for many firms. Executing trades faster than competitors translates into more customers, better retention—and higher profits.
To support these challenging goals, the networks that carry trading information must be designed for extremely low latency—far less than is required for conventional enterprise networks. Meeting and maintaining these latency levels requires significant investments in technology. Having the ability to monitor and measure network latency—more art than science—is also vital.
However, low latency is not the only consideration for HFT network design. Profitability in this intensely competitive market also requires reliable performance and risk mitigation. Furthermore, these challenging design goals must be meet in a climate of reduced IT budgets. TorreyPoint understand how to balance these seemingly competing trends and meet the needs of the most aggressive financial institution.
The TorreyPoint High Frequency Trading solution attacks the sources of latency at every level of the network while balancing the requirements for reliable performance and risk mitigation.
To design a competitive HFT platform, latency must be minimized at every level of the trading system.
The TorreyPoint HFT solution offers a portfolio of services that can be tailored to the needs of individual firms:
- Network architecture, testing and deployment
- Network optimization
- Proximity hosting and co-location consulting
- Trade infrastructure timing and metrics
- Managed NOC/SOC services
- Technology selection and strategic sourcing
The TorreyPoint HFT solution addresses the sources of latency on every layer of the network. (see figure 1) Examples of typical solutions by layer are:
- Application layer – The hardware platform supporting trading applications must be optimized
for performance using shared memory, storage area networks (SANs), remote direct memory access (RDMA), and memory caching. - Transaction layer—Typical sources of latency include legacy data distribution vendors and market data distribution. Acceleration appliances and low-latency vendors can address these issues.
- Network layer—Network security devices such as firewalls can introduce significant latency. Specialized hardware security appliances can alleviate these problems.
- Interface layer—Characteristics of the physical cable, including cable type and length, are sources of latency at this level. Techniques for minimizing these effects include physical proximity and the use of high-speed transmission media such as fiber optics and InfiniBand.
- Application layer – The hardware platform supporting trading applications must be optimized for performance using shared memory, storage area networks (SANs), remote direct memory access (RDMA), and memory caching.
- Transaction layer—Typical sources of latency include legacy data distribution vendors and
market data distribution. Acceleration appliances and low-latency vendors can address these issues.
- Network layer—Network security devices such as firewalls can introduce significant latency. Specialized hardware security appliances can alleviate these problems.
- Interface layer—Characteristics of the physical cable, including cable type and length, are sources of latency at this level. Techniques for minimizing these effects include physical proximity and the use of high-speed transmission media such as fiber optics and InfiniBand.
Designing and implementing an HFT network is a team effort.
Financial firms are understandably reluctant to engage consultants to help with their HFT network. After all, trading algorithms and other intellectual property are their most valuable assets, and restricting access to these “crown jewels” is a primary imperative.
TorreyPoint has established trusted relationships with financial firms of all sizes. Our approach is collaborative—we invest the time and talent needed to create a strong partnership with the company’s in- house IT team. The in-house groups understand the requirements and the capabilities of the production environment. TorreyPoint brings knowledge of the latest trends in the HFT marketplace, access to best-in-class products, and visibility into our partner OEMs’ roadmaps. We know how to blend these complementary skill sets into a coherent and cooperative working team that can drive the HFT project to a successful completion.
Designing an HFT infrastructure is a specialized skill that requires deep knowledge of the network and years of hands-on experience. TorreyPoint’s engineering consultants bring these capabilities and more to the table, making them ideal partners for financial firms who want to leverage their network to execute faster and more reliably than their competitors—and succeed in this demanding business climate.
