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Im an undergrad student trying to become more familiar with how HFT works. In specific, I was wondering what kind of hardware they use and how each piece contributes to the system. I've been led to believe FPGAs play a big role in the architecture and was wondering what exactly they are used for in the system.

Thanks!

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  • $\begingroup$ What kind of undergrad are you? It may be better to understand the strategies first to better reason why such high performance hardware is required. $\endgroup$
    – BAR
    Jun 8, 2015 at 19:02

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In trading you need to make a lot of simple computation of a very large flow of data. FPGA are perfect that for. It is typically FPGA that will host

  • marketfeed handler (see NOVASPARKS website, or ACCELLIZE) ;
  • analytics computations ;
  • risk computation (see ULLINK solution for instance).

For more, this generic article is not that bad: Introducing FPGA-Based Acceleration for High-Frequency Trading.

But the best is to read Market Microstructure in Practice ;{)}

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  • $\begingroup$ Correct me if I am wrong but this doesn't seem like a rather sophisticated architecture. What's stopping you (and other quants) from starting their own market making companies given that it's quite lucrative? (I am trying to understand the challenges) $\endgroup$
    – Adnan Tamimi
    Jul 31, 2022 at 11:13
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    $\begingroup$ funny remark @AdnanTamimi, first of all starting a company is not something that anyone has the talent to do (it is not about being quant or not, it is about being entrepreneur), second the fixed costs to do it increased year after year, and it is now a very competitive space that already consolidated, see thetradenews.com/hft-not-so-flashy-anymore $\endgroup$
    – lehalle
    Aug 3, 2022 at 7:32
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    $\begingroup$ @AdnanTamimi, if you are interested by the business models of intermediaries on financial markets (i.e. market participants), you can have a look at my last book with Amin Raboun and others: "financial markets in practice" worldscientific.com/worldscibooks/10.1142/12731 $\endgroup$
    – lehalle
    Aug 3, 2022 at 7:53
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FPGA's are used to run the latency sensitive HFT strategies.

They can also be used solely for parsing whatever protocol is in use (FIX, ITCH, etc..) and routing the decoded objects to a CPU for number crunching.

They can of course be used for anything else but these two uses are what is most common now.

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