Understanding networking in HFT systems
Trading systems receive market data and send orders from/to exchanges. The numerous processes spread out across different machines within a trading system need to communicate with one another—for instance, a process keeping track of a position of an instrument across the design will need to send information to all components regarding the position of a given asset. Networking defines how devices are interconnected with each other. Networking is required to transfer data from a machine to another one (by extension, to an exchange).
The network is the underpinning of all HFT systems and needs to be considered as carefully as the design decisions for software systems.
The device ensuring communication in any system is called the Network Interface Card (NIC). It allows communication between the computer where software runs and the outside world. When we understand how a trading system works, we must examine the layered model used to...