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 ...
A blog that helps you lead a better life along with giving you a glimpse of the journey of an IITian as a trader in a High Frequency Trading Firm.