Low Latency Trading Start-Up

Discussion in 'Automated Trading' started by infinite_alpha, Jan 18, 2011.

  1. Hi all,

    I have been trading for years, and I am looking to take my trading to the next level. I have spent the past year researching, putting together, back testing tick data, programming some algos in C++ etc... some strategies that will require a little bit of speed. The type of speed a retail platform will not be able to provide me with, but not the type of speed needed for latency arb. I do not have a million's to dish out on fees per month!

    I am entering uncharted territories as I know very little about putting together a low latency system. I am would like some advice on setting up such a system. I am planning on trading my strategies on global futures markets. I have spoken with the folks at RTS and they do provide a turnkey solution at a reasonable price, however if I am able to put together a "fast enough", system to get me started, at a lower monthly cost I am very interested in doing so.

    What is the basic recipe, for people starting out in this business? API, Colo, Complex event processing software, leased line, data center, low latency price feed, servers - I fail to see how these pieces fit together and what the essentials are to putting together a system on a budget.

    Please hit me with some advice or point me towards some resources that might be useful to me. Thanks guys. Happy trading!
  2. rosy2


    People usually start with something like RTS, orc, aegis, ...
    and then they begin to build in house systems. Since you fail to see how the pieces fit together stick with the vendor solutions.
  3. Low latency system "on a budget" = oxymoron
  4. LeeD


    Disagree. I you can substantially improve latency via colocation with a broker, which is nearly in the "retail" price range. Such an arrangement makes aprroaches like "buy at bid, sell and ask unless proce moves" for improvement of entry/exit price levels of a longer-term trading system fully feasible.
  5. Thanks LeeD, I am intrigued, please explain further if you don't mind or PM me.
  6. Are you running a latency model or just a short term model which trades with a higher frequency and you are trying to eliminate slip and entry delay?
  7. high frequency: NO , elimate slip: YES, fast entry: YES. Decision engine produces trade signals once those decisions are rendered I need to enter fast with minimal slip and try to buy/sell several prices!
  8. it really depends.

    Lets get clear: The last milliseconds will be brutal. Point.

    The rest does not really require infrastructure - more smart selection of partners.

    * You need a decent fast server that is good for trading. Well, take a server (any), put up a fast processor, load enough memory, only run trading. Done.

    * You need to optimize your losses. Time losses basically are latency - from you to the exchange, and the data from the exchange to you. ALL THIS can be done "cheaply" by selecting the right colocation center. Basically you have two data lines you are interested (if you get your data from your broker then only one), and you want to get as close there in terms of ms latency as you can.

    Getting this down to sub 10ms should be technicalyl easy- this would mean somewhere in the same downtown with a decent infrastruture. Not same building, necessarily, if optical fibres are available.

    There are some hosters optimizing their network connections for this. Not as cheap as normal ones, but not "thousand USD per monh per rack unit".
  9. LeeD


    NetTecture summed it up nicely.

    MB Trading VPS Hosting, which I referred to as "cheap colocation from a broker" earlier, offers basically what NetTecture suggested: servers from a hosting company located near the broker. The broker also provides tick and historical data (for a fee). I am sure you can find a similar solution yourself (and with a different broker) but here someone has already done the legwork.

    One thing to note is with a low-cost solution the bottle neck will always be the broker. The broker checks if the account satisfies margin requirements before sending the order to the exchange. With some brokers, if you send an order from Europe to an American exchange there will be some exchange between broker's American servers that process the order and Broker's European servers that hold the account data and check margin. This naturally slows things down. Further, futures are traded on a specific exchange; stocks are trade on multiple trading venues (exchanges and black pools). So, the broker server will spend some time deciding which venue or combination of venues to send the order to. (This process is known as "smart routing".) Broker's own connection will have diferent latency with different venies. HFT shops send orders directly to an exchange bypassing a broker altogether but one needs certain capital to qualify and there is a talk of banning this altogether for those who aren't a registered broker-dealer or exchange member. For an individual the way to achieve direct market access (if needed) is to join a prop shop that would allow it.

    Given there are inevitable dalays in order routing and network infrastructure, I would argue you don't need a particularly fast server unless you track hundreds of instruments or the trading algorith is particularly computationally intensive. (If you are going to use a trading platform as opposed to writing your own code to communicate with the datafeed and the broker, some are vastly more efficient at processing large amounts of tick data than others. So, you may need faster hardware to compensate.) What is more important than raw power is to eliminate activity from other applications on teh PC that is not absolutely necessary. Disable unnecessary Windows services. Make sure the antivirus/security software doesn't auto-update or run disk scans during market hours (some prefer not to run such software at all on autotrading boxes.)
  10. LeeD


    Regarding what latency is considered "low", from http://www.rithmic.com/home.html:

    "Rithmic's trade execution software delivers to you the low latency and high throughput performance formerly seen only by the very large trading houses and boutique hedge funds - Tick-to-Trade in less than 250µs."
    #10     Jan 19, 2011