Electronic Trading Architect | Strategic Advisor

The same reject message can mean slow down or stop. Euronext, on throttling: "In FIX, clients receive Reject (3) messages". Breach the limit badly and you "won't be allowed to reconnect for 3 seconds". The FIX 4.2 dictionary says a Reject "indicates a serious error that may be the result of faulty logic in either the sending or receiving application". Coinbase Exchange: "Your FIX 5 session is disconnected if your messages exceed 200 messages per second". Send your handler a Reject (3) with tag 373=26. Does it back off or stop? More in chapter 24 of my book, The Electronic Trading Stack.

Databento reports OPRA's 99th percentile falling from 543.5 to 57.5 microseconds. On the same page, Databento says "the OPRA SIP's median latency has been mostly unchanged around 19.5 to 20.5 microseconds". The median stayed near 20 microseconds while the 99th percentile fell by about 89 percent. Does your report show it? From my book, on desks I have seen: "that blind spot runs low single-digit basis points on burst days". More in chapter 41 of my book, The Electronic Trading Stack.

When your book looks wrong, can you prove whether it was the market or your code? The book says capture "the raw wire feed at ingress, before parsing or normalization touches it, with a hardware timestamp". A 10 Gbps feed near line rate makes on the order of 4.5 terabytes of that an hour. Then: "Run the same binary over it. Then prove the output matches." If you keep only the derived snapshots, "you cannot tell whether a discrepancy is a market event or a bug in your own book-building logic". More in chapter 21 of my book, The Electronic Trading Stack.

At fifty trades an hour, a sixty-second signal sees less than one trade on average. From my book: "At fifty trades an hour, a sixty-second window sees 0.83 events on average. At that rate, calibrating a parameter is guessing on noise." Cont, Kukanov and Stoikov found "a linear relation between order flow imbalance and price changes, with a slope inversely proportional to the market depth". On a thin book, count how often your signal's window gets no input at all. More in chapter 40 of my book, The Electronic Trading Stack.

At Eurex, every modify you send costs two against your order-to-trade ratio. Eurex: "A modify of an order or quote is treated as a 'delete' followed by an 'add'. Thus, the original order and the new order will both be counted towards the ordered volume". Cboe EDGX Options, for market makers: "calculated monthly based on the total number of orders (including messages to modify orders)". Tier 7, 20,000 orders per trade and above: a $150,000 fee. If your model counts a modify once, your real Eurex ratio is higher. More in chapter 38 of my book, The Electronic Trading Stack.

The book Electronic trading, exchanges, architecture

The Monte Carlo method wasn’t created for pricing financial options. It originated in the mid-1940s at Los Alamos during nuclear weapons development. Stanislaw Ulam came up with the idea in 1946 while recovering from illness and playing solitaire; Nick Metropolis named it after the Monte Carlo casino. It was first used to model neutron diffusion and multiplication. #options #derivatives

Made it to the top #1 new releases! " The Electronic Trading Stack " Collected Field Notes on Architecture, Latency, and Execution Quality in High-Frequency and Institutional Trading Thanks all for the feedback received!!

My last book is a collection of all the articles I've been writing in the past year. Rearranged for easy reading. All printed in a book and in one place. Stays next to my desktop for reference. (online articles remain fully for free, so having this book is not necessary for reading them) The book: The Electronic Trading Stack: Collected Field Notes on Architecture, Latency, and Execution Quality in High-Frequency and Institutional Trading Find it on Amazon now!!

Today, retail traders get live level 2 quotes on their phones. In the 80s and early 90s, access to market data was not as early accessible: • Reading ticker tape and chalkboard boards • Green-screen Quotron machines with 15-minute delays • Early Reuters and Bloomberg terminals costing fortunes If you had the data 30 seconds (HUGE) before someone else, you had an infinite edge. How the flow of market information changed over the decades. 👇 Source: Daily Mail — Experts By Decade: Wall Street Trader Life #marketdata #bloomberg #quants

When electronic trading arrived, traders thought it would never replace human instinct and relationships. Then Instinet, Island ECN, and matching engines showed up. Spreads collapsed, pit trading evaporated, and human market makers were replaced by low-latency algorithms and high-frequency trading firms. How people felt back then when the biggest technological disruption came down in Wall Street? 👇 Source: Daily Mail — Experts By Decade: Wall Street Trader Life #electronictrading #HFT #fintech #wallstreet