A limit order book is a component that gathers all the orders and sorts them in a way that facilitates the work of the trading strategy. The order book is used by exchanges to maintain sell and buy orders. When we trade, we need to get the book of the exchange to know which prices are the best or just to have a view on the market. Because the exchange is located on another machine, we will need to use the network to communicate changes on the exchange book. For that, we have two methods:
- The first method is to send the whole book. You will realize that this method would be very slow, especially when the exchanges is as large as NYSE or NASDAQ. This solution is not scalable.
- The second method is to first send the whole book (like the first method), but then instead of sending the whole book each time there is an update, we just send the update...