High Frequency Trading Dennis Shasha (mostly from Jake Loveless’s article

Goal Receive packet Perform business logic Send out response in 100 microseconds or so

At those speeds everything matters Speed of light vs. speed of fibres to various exchanges. Speed of fibre within buildings. Power of server Avoiding problems of operating system

Challenge: bursts Change in U.K employment Changes US/Pound exchange rate Affects treasury rate Affects companies that take debt, even countries that do no business in the U.K.

Networking Fibre is too slow for some info (e.g. burst-causing events) Want to use wireless (e.g. microwave) for those. Case study: microwave from Chicago to New York

Trading Bid queues (price at which willing to buy) /ask queues (price at which willing to sell) If very few bids and a lot of asks, then a given ask will have low likelihood to be met. However there can be cancellations – the vast majority of orders are cancelled in fact. Switch to Loveless slides (figure 9)