Infrastructure at a High Frequency Trading Firm (HFT)

 HFT strategy profitability depends on two factors: latency and competition (i.e. the number of robots taking advantage of the same alpha).

If you are lucky to be the only one who uses the alpha you do not have to care much about the latency. If there is at least one more robot on this alpha you only make money (or make more money) if you are faster. The more competitors you have the more important the latency factor. Mathematically this functional connection can be expressed as follows: latency*concurrence= const

Trading infrastructure considerably affects the trading results because it is there the latency provided.

The latency is made up of the following parameters:

a) Market data propagation time from the data source to the server running the trading platform and the strategy. Delay in the channels matters if the market data is sourced from other exchanges.

b) The time that elapses between data packet delivery to the network adapter and data delivery to the application. The network adapter takes time to process the package and then it takes time to deliver the package to the application.

c) Strategy execution time. It is the promptness of your trading system that is the key to competitive performance. Your server’s hardware and operating system ability to process in low-latency are important as well.

d) Time for the order to get from the application to the Ethernet cable.

e) Time for the order to get from your server to the exchange

Specific job profiles related to this work

There is a specific role which usually takes care of the infra side processes of any strategy. The role is Infra Developer. Having said that, the strategist or the quant trader or researcher is also expected to know about these processes so that they may take full advantage of the pipeline and strategise accordingly.