Summary
As previously described, one nanosecond can create an edge in HFT. Knowing the microstructure of the market by learning how an exchange works (in terms of priority queues and the matching engine) will help you understand how to design your trading strategy. You now know that amending the price of an order will result in the loss of priority of the amended order in the queue. We also learned that depending on the exchange, changing the quantity of an order can get the same result. This chapter showed you how to design a trading exchange. We developed an in-depth understanding of how a matching engine works. In the next chapter, we will explain how hardware and operating systems operate in the context of HFT systems and trading exchanges.