Sunday Jan 29, 2023

Two Technology Trends in High-Frequency Trading

It was great to get back to the office after the Christmas break, no more cold turkey! Setting out plans for the coming year is a great opportunity to look at what the commentators are saying will be the trends of the New Year. The buzz in the High Frequency Trading space is all about the coming regulation and European Union MiFID 2 (Market in Financial Instruments Directive) in particular. I normally perceive regulation as a bad thing, more work with no gain, but we would not have the market fragmentation in Europe without MiFID; which broke the monopoly of country stock exchanges. 45% of the FTSE 100 stocks are now traded off the London Stock Exchange. The Tabb Group, a consultancy, reckons HFT accounts for 56% of all equities trades in the US and 38% in Europe. The trend can only go one way with more market players getting into the HFT style of trading.

What Is High Frequency Trading and How Does It Work? - TheStreet

Two technology trends to watch this quarter

Growth in the market is great news for us in the technology space but we are also seeing developments in the Low Latency Networking space that will affect the infrastructure designs we are providing. The first is Precision Time Protocol (IEEE 1588, PTP) in silicon on network cards and the second is purchase of Voltaire, subject to approvals.

What PTP means for the Low Latency market.

  • Accurate measurement of latency arbitrage. Traders will know to micro-second how long their position changes are taking and will be able to see arbitrage opportunities. The losers will have to get smarter which is good for market efficiency.
  • Consultants who have built a business on deploying estimated trade times by inserting probes and parallel processing runs will have to amend their approach because the network side will be producing accurate results, at last!
  • The providers of network kernel by-pass acceleration will be able to quickly and simply demonstrate the benefits of their technology, making it easier to sell the concept. Who can argue with figures that trustworthy that so a drop from 20ms to 9ms.

High-Frequency Trading (HFT) - Overview, Advantages, Risks

The other news at the end of last year was the purchase of Voltaire, the Infiniband infrastructure vendor, by silicon manufacturer Mellanox, the only other major player in the Infiniband tech space. This consolidation of the market will focus the attention on the furious Infiniband verses 10 Gigbait Ethernet (10GbitE) debate. Watching the vendors throwing stones at one another will be fun but the High Performance Computing market is big enough to support both technologies and I think the High Frequency Trading market will do the same.

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