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Thoughts on low latency trading if exchanges went full cloud

blog.abctaylor.com

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Re: Thoughts on low latency trading if exchanges went full cloud

#71

Post by lucianbr »

posnet wrote: post #54

The biggest current limitation with cloud providers when it comes to exchange tech is the lack of real multicast support. It is rare outside of exchanges, but extremely low latency L1 multicast market data has become the backbone of exchanges, both for fairness and for scalability. Knowing you can saturate your entire network with 10G traffic and every participant will get the same market data packets at the same tim…

I find it sad that equal access between the entities doing HFT and regular Joes is not required for fairness, but god forbid one HFT having some milisecond advantage over another. That would be unfair. Can't have that.

Re: Thoughts on low latency trading if exchanges went full cloud

#72

Post by vegardx »

posnet wrote: post #54

The biggest current limitation with cloud providers when it comes to exchange tech is the lack of real multicast support. It is rare outside of exchanges, but extremely low latency L1 multicast market data has become the backbone of exchanges, both for fairness and for scalability. Knowing you can saturate your entire network with 10G traffic and every participant will get the same market data packets at the same tim…

In AWS you don't even do neighbour discovery through ARP. Or that's a lie, you do, you get a arp reply, but it's not from any of your devices on the network. And traffic is authenticated and authorized at both the source and destination, so you can't do fun things like manipulating arp tables. You get a lot of nice features when you have a fully software defined network, but it comes with a couple of caveats, like you mentioned here. I doubt we'll ever see "real multicast support" in the sense that network engineers are used to.

Re: Thoughts on low latency trading if exchanges went full cloud

#73

Post by crote »

kasey_junk wrote: post #41
jstsch wrote: post #10

Nice article. Wondering though why trading is not done in discrete batches, e.g. 5 second intervals? Trades in the same interval get filled equally or stochastically? Info about trades with that same 5 second batch delay? Is there some (theoretical) market efficiency thing at play? All this HFT feels wasteful and bad for 'regular' human investors.

How do you tie break? If there are more sellers than buyers (or vice versa) at the clearing price?

Flip a coin.

Re: Thoughts on low latency trading if exchanges went full cloud

#74

Post by johngladtj »

dusted wrote: post #62
cosmic_quanta wrote: post #60

Earlier quoted context omitted.

> it's not like the trading in and of itself brings any value to the broader world This is a common sentiment, but the reality is that increasing market participation is good for everyone. Yes, even retirement funds benefit from the presence of market-makers. Liquid markets allow for better price discovery and cheaper transaction costs.

I specifically the high-speed trading. I definitely agree that actual investment and trading has some benefit. Nobody was helped by the 200 nanosecond thing that the machines did when the marked opened (except the owners of said machines, of course)

Plenty you people were, you just don't notice it.

Re: Thoughts on low latency trading if exchanges went full cloud

#75

Post by smabie »

pas wrote: post #57
dchftcs wrote: post #26

Earlier quoted context omitted.

You mean enabling arbitrary code execution from a third party when you can lose billions of people's money in half a second? Also if two people want to make the same trade, who gets it? Exchanges do provide very limited special conditional execution instructions such as peg orders or stop orders, but it seems like a hard problem for them to support anything more sophisticated and general.

It doesn't have to be arbitrary machine code. eBPF / WASM coupled with a standard library supplied by the exchange. (Plus the exchange can run it in a VM.) > Also if two people want to make the same trade, who gets it? Whoever pays more currently, right? So it can be uniform random and folks can pay for better than random chance, etc.

Or we could just.. not do that? It provides no benefit and a host of downsides

Re: Thoughts on low latency trading if exchanges went full cloud

#77

Post by vegardx »

aynyc wrote: post #67
KiranRao0 wrote: post #5

One key consideration is “provable fairness”. It’s my understanding that exchanges use techniques like long, same length fiber optic cables to all racks within the exchange datacenter to convince customers that everyone is on a fair playing field. This is a lot harder to do when a server is virtualized somewhere on some rack on EC2. Exactly as mentioned, people will try to optimize by spinning up/down instances as cl…

It's provable that it's not fair. AWS multicast is software based, not hardware based.

I think the lines between software and hardware-based are a little blurred these days with accelerator cards and whatnot. It's just a lot harder to come with the same level of guarantees when you're basically running a hypervisor on top of it.

Re: Thoughts on low latency trading if exchanges went full cloud

#78

Post by smabie »

TacticalCoder wrote: post #43

How would any cloud offering deal with something like, say, the full options data feed, which is close to 40 Gb/s of binary packed goodies? You need both a very fat pipe and ultra-low latency: does the cloud, any cloud, offer that? Also: how often have you guys seen the stock market being down? What's the "x nines" availability of, say, the US stock market and US options feed? Now: do we wanna talk about the various…

What does cloud have to do with micro services and json? Crypto exchanges already run on the cloud and it works.. mostly fine?

Re: Thoughts on low latency trading if exchanges went full cloud

#79

Post by smabie »

jwie wrote: post #42

Orders should have some durability and it would probably change behaviors enough to make hft go away. If you list a buy or sell order it just has to be in force for some period of time, say a minute or something. HFT shops will say this would reduce liquidity, but it would only make clear what real liquidity was in the first place.

If orders has to been good for atleast a minute it would massively increase the spread (by like over a 1000x probably)

Also, what's wrong with hft?

Re: Thoughts on low latency trading if exchanges went full cloud

#80

Post by xnorswap »

kasey_junk wrote: post #41
jstsch wrote: post #10

Nice article. Wondering though why trading is not done in discrete batches, e.g. 5 second intervals? Trades in the same interval get filled equally or stochastically? Info about trades with that same 5 second batch delay? Is there some (theoretical) market efficiency thing at play? All this HFT feels wasteful and bad for 'regular' human investors.

How do you tie break? If there are more sellers than buyers (or vice versa) at the clearing price?

The same way you would without a clock I guess?

You could match what you can distributed equally and leave the rest unsettled.

You could let people decide whether to roll-over the partial bid into a new bid on the next clock or to cancel unsettled.

You could clock to something both very fast on a human scale (50ms), quick enough it'd still feel instant but slow enough that it could reduce HFT silliness and need for extreme low latencies.

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