Book Image

Developing High-Frequency Trading Systems

By : Sebastien Donadio, Sourav Ghosh, Romain Rossier
5 (1)
Book Image

Developing High-Frequency Trading Systems

5 (1)
By: Sebastien Donadio, Sourav Ghosh, Romain Rossier

Overview of this book

The world of trading markets is complex, but it can be made easier with technology. Sure, you know how to code, but where do you start? What programming language do you use? How do you solve the problem of latency? This book answers all these questions. It will help you navigate the world of algorithmic trading and show you how to build a high-frequency trading (HFT) system from complex technological components, supported by accurate data. Starting off with an introduction to HFT, exchanges, and the critical components of a trading system, this book quickly moves on to the nitty-gritty of optimizing hardware and your operating system for low-latency trading, such as bypassing the kernel, memory allocation, and the danger of context switching. Monitoring your system’s performance is vital, so you’ll also focus on logging and statistics. As you move beyond the traditional HFT programming languages, such as C++ and Java, you’ll learn how to use Python to achieve high levels of performance. And what book on trading is complete without diving into cryptocurrency? This guide delivers on that front as well, teaching how to perform high-frequency crypto trading with confidence. By the end of this trading book, you’ll be ready to take on the markets with HFT systems.
Table of Contents (16 chapters)
1
Part 1: Trading Strategies, Trading Systems, and Exchanges
5
Part 2: How to Architect a High-Frequency Trading System
10
Part 3: Implementation of a High-Frequency Trading System

Chapter 3: Understanding the Trading Exchange Dynamics

In the previous chapter, we learned how to create High-Frequency Trading (HFT) systems. We focused intensely on the critical components of a trading system. We also reviewed in detail how to create an order book, which is basically a replication of what an exchange collects from all the trading participants. In this chapter, we are going to study how an exchange works.

We will describe the functional components of an exchange and we will focus in depth on the matching engine. Understanding how the matching engine of an exchange works is one of the most important tasks you will have to do when creating HFT strategies.

This chapter will cover the following topics:

  • Understanding trading exchanges
  • Understanding matching engines
  • Architecting a trading exchange

In Chapter 2, The Critical Components of a Trading System, we gained a decent idea of how to design a trading system. We went over how to design...