Chapter 11: High-Frequency FPGA and Crypto

Welcome to the final chapter of this book. In the previous chapters, we saw how to optimize traditional trading to obtain a high-frequency trading (HFT) system working with a tick-to-trade latency of 5 microseconds. In the next section, we will discuss how to improve this latency to 500 nanoseconds using advanced hardware optimization. Finally, we will conclude this book by exploring the difference between traditional and cryptocurrency trading.

Our goal in this chapter is to show that the software solution we used in the past chapters has limitations in achieving latency lower than 1 microsecond. Using a specific piece of hardware, we will show you that it is possible. The second goal is to apply the optimization we explained in this book to cryptocurrencies. We will elaborate by extending the design to the cloud.

In this chapter, we will cover the following topics:

• How Field Programmable Gate Arrays (FPGAs) hardware can...

Reducing latencies with FPGA

In this section, we will look at the Field Programmable Gate Array (FPGA), investigate the evolution of the fierce competition of speed in HFT, and then discuss the motivation for using FPGAs in modern HFT. We will also explore how an FPGA itself works, the design of an FPGA-based trading system, and the advantages and disadvantages of using FPGAs in HFT systems.

Evolution of the fierce competition of speed in HFT

As we have seen in this book, HFT has received a lot of attention, become extremely popular, and also grown to become a significant component of all financial market liquidity and trading. We have also seen that HFT (as the name implies) is all about speed/latency – the speed at which HFT systems and algorithms can analyze market data information, send order requests, and execute trades.

To summarize, latency refers to the total time to travel from one point to another for a data packet. However, specifically in trading, latency...

Exploring HFT with cryptocurrencies

In this section, we will describe the differences between HFT in cryptocurrencies and HFT in traditional assets. There are many other resources on crypto-assets, such as Packt's Complete Cryptocurrency and Blockchain Course (video) written by Ravinder Deol, Rob Percival, and Thomas Wiesner (https://www.packtpub.com/product/data/9781839211096). We will focus on the HFT in crypto by explaining how transactions work and how the exchange works to build low-latency transactions in this area. Cryptocurrencies have been getting into the trading world since Bitcoin became a major value on the crypto market. More and more companies got attracted by the benefit of trading cryptocurrencies. Like any other assets, hedge funds and trading firms started building HFT systems for digital assets.

What is crypto?

Cryptocurrencies are digital assets that are produced with the use of computer networking software. This computer network is not reliant on any...

Summary

This chapter was the final chapter of this book. We discussed how to improve the tick-to-trade latency using FPGA. We studied how crypto trading was different from traditional trading. We learned how to build an HFT system in the cloud.

Since this is the end of this book, we would like to take the opportunity to remind you that technology evolves very fast. In this book, we presented the basics of HFT. However, we need to remember that being among the fastest HFT companies costs a lot in terms of money and time. Engineers, hardware, network, and connections are vital parts of HFT. Even if we don't have the quickest architecture, data analysis can always help build robust HFT strategies capable of performing within the limitation of our system. This book drew the basics of creating an HFT system by considering the HFT optimization technique.

We are getting to the end of this journey together. We would like to thank you for reading this book and invite you to contact...

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