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iliicit


Total Posts: 3
Joined: Dec 2018
 
Posted: 2018-12-21 17:07
What is the easiest way to start in HFT shop? Let's say I have the capital and the strategy. Here is the (clueless) way I see the high-level plan

1) Find a vendor/platform that can provide the software to connect to the exchanges, and maybe a framework for developing HFT strategies.
2) Code the strategy and run backtests
3) If things look good then move on to set up a legal entity for the HFT shop.
4) Find a broker that works with my vendor from step 1, open an account, deposit cash
5) Start trading

I'm sure I'm missing a lot here...

From the technical side, I'm looking for a vendor that can provide the following.

- software stack that integrates with the exchanges and provides an interface to place orders.
- low latency connection (ideally under 100 micro seconds for round trip - not the industry fastest).
- colocation near the exchanges
- historical tick data with timestamps that correspond to the connection specs.

Will be grateful for any tips or recommendations.

RadicalAutism


Total Posts: 1
Joined: Dec 2018
 
Posted: 2018-12-24 01:08
Are you kidding?

If you have "the strategy", you're good to go. Steps 1-5 are completely doable with a competent engineer (~$200k/year) and maybe $5k in other expenses, but a winning trading strategy is worth millions or billions of dollars

ChicagoHFT


Total Posts: 6
Joined: May 2018
 
Posted: 2018-12-24 02:35
You don't have the capital to run HFT. In HFT you don't even deal with brokers, you work with clearing firms and get your data direct from the exchange. Will cost you easily 6 figures for a small operation and 7 figures for a big one, A MONTH.

You're describing generic automated trading. Anytime there's a middleman reselling stuff unless it's something like Mckay Bros, latency goes out the window.

iliicit


Total Posts: 3
Joined: Dec 2018
 
Posted: 2018-12-25 15:48
Sorry, I wasn't clear. I'm really looking for HFT kind of connections, under 100 microseconds (not milliseconds). I don't need THE FASTEST connection (i.e. microwave). But I'm looking for a fast one. One of my friends worked with Thesys Tech stack. They provide high-quality tick history, a software framework to code strategies in C++, 20-microsecond baseline connection to the exchange. Basically what I'm looking for. But Thesys phased out live trading. So I'm looking for similar vendors who can provide all the infrastructure. I know the cost will be significant.

anonq


Total Posts: 35
Joined: Aug 2018
 
Posted: 2018-12-25 17:25
Thesys is still an option. They sold off the prop business and now are just a fintech company.. https://www.thesystech.com/pdf/7256b8_030155701c5a48468ba2fd96feb9e616.pdf
Otherwise maybe Quanthouse would do the trick

Out of curiosity do you know how Thesys charges? Monthly cost based on infrastructure used?

But can't really imagine going either path but what we did was create a business entity and register with the SEC (do have outside money)

Then found a prime broker and opened the account. Bought data from all necessary exchanges/vendors. Hired vendor for market data connectivity for our colocated servers. We consume the raw data from the exchanges and send orders in exchanges native protocols.

Wrote all the software and started trading. Have intraday alpha but do carry positions overnight.

If doing a nasdaq only model for example can maybe get it done for like 10k/month not including initial infrastructure cost, but if need to consume book feeds from every exchange and colocated at them then really starts to add up...


Strange


Total Posts: 1557
Joined: Jun 2004
 
Posted: 2018-12-25 18:33
@anonq, so you are trading DMA but through a prime broker, right? If so, out of curiosity, what is the round trip for the risk checks that you are getting?

PS. 10k/month for a single(ish) exchange (and lower-grade setup) is what I've heard from a number of people too

Eher Ende mit Schrecken als Schrecken ohne Ende

EspressoLover


Total Posts: 368
Joined: Jan 2015
 
Posted: 2018-12-25 19:00
I have a pre-existing software stack that my checks all your boxes. It's set up for market data and order entry for a a number of DMA protocols, and shouldn't be hard to port to any major exchange.

I'm just a prop trader, not a tech vendor, so it won't be a polished product. But on the the flip-side there's a lot more flexibility to work out a licensing arrangement. Depending on what you're looking at, I might even be able to sub-lease alphas or other strategy components. Anyway, drop me a line if you're interested.

Good questions outrank easy answers. -Paul Samuelson

anonq


Total Posts: 35
Joined: Aug 2018
 
Posted: 2018-12-25 19:02
@Strange yeah dma through a prime broker using an fpga solution for risk checks/order entry, it's single digit microseconds


Strange


Total Posts: 1557
Joined: Jun 2004
 
Posted: 2018-12-25 19:22
@anonq thanks! i was quoted a garden variety, from carrier-pigeon territory like +150 mikes to 5-6 micros

@EspressoLover - since I know you trade options, did you build that aspect of the pipeline yourself or use one of the pretty vendors?


Eher Ende mit Schrecken als Schrecken ohne Ende

anonq


Total Posts: 35
Joined: Aug 2018
 
Posted: 2018-12-25 19:37
@Strange np, and yeah that sounds reasonable, pretty easy to get that fast these days but still not fast enough to compete with the top players unfortunately

Strange


Total Posts: 1557
Joined: Jun 2004
 
Posted: 2018-12-26 00:04
True that! I think trying to beat them is hard and is probably a fools errand. I just want to be the fastest turtle out there - the aim is to reduce my transaction costs and to be able to get a bit more size for the longer term intraday alpha.

Eher Ende mit Schrecken als Schrecken ohne Ende

iliicit


Total Posts: 3
Joined: Dec 2018
 
Posted: 2018-12-28 00:15
At the time (a couple of years ago) Thesis charged a monthly fee for research setup on AWS. All the code and tick files were hosted there, the firm was also responsible for the AWS bill. While researching the bill was under 10k. After turning on live trading on Nasdaq it went up to around 50k. Part of this went to Thesys, another part to the third party risk check solution.

prikolno


Total Posts: 43
Joined: Jul 2018
 
Posted: 2019-01-04 21:30
I think everyone else has given you many things to think about regarding connectivity, latency requirements and monthly recurring costs, so I'll try to add something orthogonal here.

The way I see it, the biggest flaw in your game plan is not with the costs, vendor choices, or latency competition, but it's that it seems the scope of your development plan is too wide off the bat. This makes steps (1) and (2) very expensive experiments. If you have a clearer sense of what you're going after, then (1) to (4) mostly become binary/ternary decisions.

Let's talk about (4). If you need d-quotes for your strategy to work, then there's really only 1-2 brokers I'd suggest. If you need ISOs, then that seals it as well and the question is more of which FINRA compliance firm I'd recommend. I'd have different PBs to recommend if your focus is on Asian equities vs spot FX. Likewise, the futures clearing space for high-frequency customers is highly consolidated, so there's about 4 firms that really make sense for a new entrant.

Or let's evaluate (1). Today if you're shooting for EOMM, there's really only 1-2 vendors that I'd recommend. For cash equities or futures, another 1-2. If you need more than 1 level of market depth for your strategy to work, then the QH suggestion drops out because their trades and market depth feeds are async so you cannot match the two.

For several classes of strategies, it doesn't even make sense to run backtests, so (2) drops out.

Historically, the sequence of steps people took to start the firms you're competing with looked a lot like 1-5. Nowadays most people are spinning out of a past experience. If you're spinning out of a previous firm, your sequence of steps might look like (3) -> (4) -> (5) -> (1), and there's no self-loops in any of your nodes like you have in (3).

I call this the Apostol/Courant problem. It's like writing a calculus textbook. Historically, people started exploring integration problems first before discovering differentiation problems. But if you've studied modern calculus, chances are that they start with the latter because it's pedagogically simpler to develop from differential calculus once you've seen the whole thing end-to-end. It looks like you're planning to write a calculus textbook starting with integral calculus, which is noble, but bear in mind there's a whole market of textbook writers who are all going to start with differential calculus.

EspressoLover


Total Posts: 368
Joined: Jan 2015
 
Posted: 2019-01-06 16:25
@strange

Hmmm, must have given the wrong impression in a previous post. I have pretty limited direct experience with options, definitely nothing in a DMA/HFT context. Apologize for the confusion.

Good questions outrank easy answers. -Paul Samuelson

EspressoLover


Total Posts: 368
Joined: Jan 2015
 
Posted: 2019-01-06 16:25
[Duplicate]

Good questions outrank easy answers. -Paul Samuelson

DXX


Total Posts: 2
Joined: Mar 2018
 
Posted: 2019-01-08 15:01
@prikolno

which vendors do you recommend for EOMM?

prikolno


Total Posts: 43
Joined: Jul 2018
 
Posted: 2019-01-10 20:58
@DXX Do you have an email?

Tyrannosaurus


Total Posts: 4
Joined: Jan 2019
 
Posted: 2019-01-26 07:27
Your broker will eat a significant % of your profit in fees. Unless they allow naked sponsored access, you'll always be slower than DMA clients. It will be hard to get top tier fees and other traders will undercut you.

ICE NA


Total Posts: 1
Joined: Apr 2019
 
Posted: 2019-04-08 17:47
Hi Illicit,

Why don't you give me a call 646.648.3904

Brian J. Baumann
ICE Data Services | Global Markets Connectivity and Feeds
55 East 52nd St. | 39th Floor | New York, NY 10055
Tel: +1 212.323.6027 | Mob: +1 646.648.3904
brianbaumanntheicecom
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