
High-Speed Trading: Lines, Radios, and Cables - deegles
https://tabbforum.com/opinions/high-speed-trading-lines-radios-and-cables-oh-my?print_preview=true&single=true
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randywaterhouse
Sniper in Mahwah [1] details a lot of the structure of HFT trading
infrastructure, especially how microwave towers are used. It's a rabbit hole
though, he's got tons of stuff on the various ways HFT networks make things
work, including their licensing and contracting.

[1]
[https://sniperinmahwah.wordpress.com](https://sniperinmahwah.wordpress.com)

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tomalpha
I remember talking to a guy who worked on an HFT firm's in-house microwave
network. Sniper In Mahwah is (or at least was - I'm a little out of that world
these days) pretty much bang on the mark. It's amazing what you can find out
from public records, a bit of cycling and a lot of collating.

Edit: reading through some of his more recent updates I think he's still on
the money

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flunhat
Slight tangent (sort of) - has anyone else noticed that a lot of these high
speed trading firms are hiring a lot more FPGA engineers lately? Hudson River
Trading and Jane Street just to name a few. I regularly checked their job
postings over the last year because I was looking for an internship, so that's
why I noticed the change. Any thoughts?

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pgwhalen
There is barely any software in the hot path of competitive equity HFTs these
days. Even the most finely tuned C++ is probably on the order of single digit
micros tick to trade, but the goal is sub-micro.

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mhurd
State of the Art trade system performance from a couple of years ago:
[https://meanderful.blogspot.com.au/2015/08/trade-system-
perf...](https://meanderful.blogspot.com.au/2015/08/trade-system-performance-
state-of-art.html)

~~~
pgwhalen
Good source. I’m in the industry but not at an HFT, so my comment is more of a
well-informed guess.

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ttobbaybbob
There is no mention of the fact that fiber is more reliable than microwaves.
Inclement weather can cause substantial packet loss in a microwave link. Fiber
has no such issue. Getco et al may not have made perfect decisions, but the
fiber <-> microwave comparison is not apples to apples. That said, still an
interesting article.

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stephen_g
True. I believe most of them have a fibre backup. I’ve worked on ultra-low
latency microwave at 80GHz that we were selling to HFT network providers, and
the needed the fibre fallback whenever it was raining, but apparently the
latency difference of the radios gave them a massive advantage when the
conditions were good.

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OnePunchMan
Is 80GHz normally in unlicensed band worldwide? What kind of distances were
you able to transmit without losing edge on latency?

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zevyoura
If you found this interesting, you might also like this classic Neal
Stephenson piece for Wired, "Mother Earth, Motherboard":
[https://www.wired.com/1996/12/ffglass/](https://www.wired.com/1996/12/ffglass/)

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madengr
The 0.5C for the PCB is only the case for stripline in a Er=4 dielectric.
Microstrip is faster since some of the E field is in the air.

Need neutrino comms, straight through the earth.

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rcarrigan87
Very interesting read, although like most things HFT it just all seems so
ridiculous. Why aren't exchanges just rate limited so everyone gets the same
execution time? Because I have better execution time I get to profit? I don't
see how that adds any value to anything...

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dsacco
_> Why aren't exchanges just rate limited so everyone gets the same execution
time?_

Why would they rate limit them? Better yet: why do you think it’s better for
the market that everyone is put on even footing?

 _> Because I have better execution time I get to profit?_

Yes. Just like better information allows you to profit. Advantages exist in
the world. Do you think better execution is trivial to develop?

 _> I don't see how that adds any value to anything..._

HFT is fundamentally the same process as market making, but faster. Market
making brings buyers and sellers together to exchange securities; doing this
process faster improves liquidity, which in turn improves price discovery,
which makes the market more efficient overall.

Just because you cannot see the value doesn’t mean it’s not there.

~~~
erik_seaberg
Market-making is bridging a gap in time between when the seller was in market
and when the buyer will be in market. If I need to race another HFT by 10 µs,
I'm not routing society's capital in a more productive direction, I'm not even
enabling a trade that wasn't already destined to happen.

~~~
mrchicity
You need to prioritize orders in the market by some objective metric. You want
a metric that rewards good behavior and punishes behaviors you don't want, for
the market as a whole, not just any one participant.

Almost all markets now prioritize on price. An incoming sell order will
interact with the highest priced bids first, and an incoming buy order will
interact with the lowest priced offers first. Think that's common sense? In
the pit days, markets were sometimes prioritized based on whether the guy was
your cousin or if your dads were fishing buddies. Better price? Oops, didn't
see you, pal.

But say 15 traders all want to buy at the best price. Who gets filled when a
seller comes in with a market order? You could:

1\. Prioritize equally: Give everyone bidding an equal piece. Fair's fair.

2\. Prioritize by size: Bid more contracts at the price and get a bigger
piece. You wanted it more than anyone else.

3\. Prioritize by time: First to bid at the price gets filled first, then
second, and so on.

Over years many ideas have been tried and nearly all markets worldwide have
settled on 3 or some variant of it, why? Batching orders together as in 1
encourages people to split their interest into many small orders. It also
discourages traders from sticking their neck out to make the best price first.
Why bid alone when you can wait for others to bid with you? Likewise with 2,
traders will try to game the system by placing very large orders and are
rarely willing to improve prices.

So we end up with 3 which causes some speed jockeying in return for forcing
traders to bid their true values right away to undercut on price, to everyone
else's benefit. In return, they get rewarded with trading first.

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jcfrei
What's your opinion on frequent batch auctions as outlined by Eric Budish (
[http://faculty.chicagobooth.edu/eric.budish/research/HFT-
Fre...](http://faculty.chicagobooth.edu/eric.budish/research/HFT-
FrequentBatchAuctions.pdf) )? He has some strong arguments against continuous
time limit order books.

~~~
mrchicity
I think the continuous price/time priority limit order book is flawed, but the
least bad option out there, similar to democracy. Speed will still matter in
batch auctions if other continuous exchanges trade correlated products--the
only way to prevent that is to force all trading to happen worldwide on the
batch auction exchange, leading to monopoly rents for the exchange operator.
Is it better to have high fees without arbitrage than extremely low fees and
tiny arbitrages where fast traders are netting fractions of a basis point?
It's not clear to me.

Also lots of liquidity in ETFs and other derivative products is provided based
on being able to hedge quickly in other tickers with high probability. If I'm
making a market in XLF (S&P Financials ETF), but my orders to hedge in BAC,
GS, MS, C, ... all get held up in a batch auction, that's extra risk. I can't
make a tight spread, large size market in the ETF since the price of the
basket components can drift away after I get a fill.

Budish also argues that arbitrages aren't competed away. It's true that
arbitrageurs will never eliminate arbitrages, only make them last for shorter
periods of time. However, natural market participants can change their
behavior to eliminate them, and they have.

If everyone trading S&P 500 futures also traded SPY with orders that arrived
simultaneously, fewer arbitrages would exist to be exploited. You don't even
need to be fast to do this, just precise with timing. This kind of routing is
very common in equities markets and it's a big part of why many early HFT
scalping models no longer work regardless of how fast you are.

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RyanShook
Great post. Contained way more pertinent info than the entirety of Flashboys.

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dsfyu404ed
tl;dr If your ultimate goal is performance you need to select/tune every part
of the system to work well with every other part.

Monkeys slapping black boxes on black boxes on top of each other is not
sufficient.

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mhurd
Sometimes speculation can help your speculation. If your speculation is not
too speculative then your speculative speculation is worthy of speculation ;-)

That is, slapping black boxes together sometimes works despite the risks.

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mxuribe
I love the way this guy writes!

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pinewurst
This link worked once for me and it's a very interesting article. Now, though,
it only prompts with "Welcome to TabbFORUM. Please log in."

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RyanShook
Try opening in incognito.

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pinewurst
That does work, thanks!

