Ask HN: I am interested in reading about techniques HFT firms use
Tech is mostly FPGA order placer interfacing with a C++ market data decision router and a high end Melanox card. Their kit is inserted as physically close to the exchange matching system as possible. One of the big firms famously reversed the box insertion into the rack and trimmed their Ethernet cables down to minimize the physical length signal had to go (probably theatre but that’s the mentality). Some strategies require good low latency inter exchange connectivity so a comprehensive and well organized microwave network is another bit of the stack. Otherwise it’s largely what you would expect. There’s some mythologizing about these companies but a few notes: they’re often highly insular and their code and stacks can be 10 or more years behind the times, but the kernel of execution will be highly current within that stack. A large part of their moat is that mythology, most people would quit and do some other segment of finance like quant trading or stat arb rather than try to squeeze out some profit in HFT. My view is it’s not a winner takes all market though and there’s a lot of room at the table, but it’s a very challenging market overall. I think bringing in a more modern tech stack that cuts the cable back a little more would be an advantage too.<p>On the techniques, there’s not a ton explicitly written unlike quant and statarb that have almost too much written about them. The essence is very simple though, you basically use techniques you would use in board games or casino games - look at the structure of the game itself and try to find little gaps in the rules that let you insert yourself. For instance if you can see the order being placed into the book before any march is processed you can try to insert yourself into the match engine before anyone else. That’s low latency trading more than HFT though. Likewise price discrepancies between exchanges (microwaves) is low latency.<p>HFT would typically be something like a market making strategy where you place lots of small orders around where you believe the market is going playing long and shorts. You place bazillions of orders all the time to pick up small variations in a way that on average is better than random trading. This is high frequency trading because the frequency of the trading is high.<p>Often they get conflated because they complement each other. Being able to do one often implies you can do the other, so why not?  They also sometimes help each other synergistically.<p>Source: I was there (and I’m building my own as a side project with some long time coworkers)