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High Performance in Trading
September 19, 2011
Raymond Russell, CTO
Agenda
Low-latency = high performance?
• Low-latency components
• Trading system performance
• Beyond latency
Market-leader in Latency Management:
• Over 20 market maker and proprietary trading firms
• 9 of the G14 group of broker/dealers monitor order flow performance
• 7 out of the top 10 investment banks as active customers*
• 18 additional tier 2 banks and brokers
• 15+ market maker and high frequency trading firms
• 14 exchanges, including 10 major global exchanges
*Source FT.com League Tables, % of Equities Fees collected in Q1 2011
Sell-Side
Exchanges
Providers
TradingNetwor
k
Buy-Side
Introduction to Corvil
For components, basically true:
• Matching engine: order to execution
• DMA engine: risk-checking and change-of-custody
• Feed-handler: exchange-tick to book-update
Low-latency = High Performance?
Low-latency = High Performance?
Trading imperatives driving high-performance:
• Lifting trades before the competition does
• Response time and speed of access to market
• Execute trades at optimal price and speed
• Scale and timing
• Competitive but profitable spreads
• Tracking the market to keep books balanced
Arbitrage Trading Market Making Algorithmic Trading
Low-latency = High Performance?
Q. How to measure algorithm performance?
• Execute trades at optimal price and speed
• Scale and timing
• Execute trades at optimal price and speed
• Scale and timing
Many fast orders?
One long transaction
?
Market slippage?
Algorithmic Trading
Low-latency = High Performance?
Q. How to measure algorithm performance?
A. Tick-to-order latency
• Performance determined by system latency:
Quote Market-data Strategy Order-entry Trade
Market data
Order
• Execute trades at optimal price and speed
• Scale and timing
• Execute trades at optimal price and speed
• Scale and timing
Algorithmic Trading
Low-latency = High Performance?
Q. What drives component latency?
A. In well-designed and well–tuned components, load drives latency
Latency in absence of load a sign of poor design or configuration
Feed-handler latency
Market-data rate
Summary
• Latency a critical performance metric for components
• High-performance trading demands system-wide performance
• Capacity under load as important a dimension as latency