Connecting to the back-end of a prop-firm

C

clearinghouse

I am still using front-end applications (like Sterling, Lightspeed, etc.) to make money, but I want to push into exchange colocation and make incremental strides towards achieving an HFT infrastructure.

The market-data side is straight-forward.

It's the order-placement and associated technology I don't have full visibility into. Has anyone ever used their prop firm's existing relationships, but built their own direct connectivity into the exchange? What's involved on the back-end at a minimum to bypass front-ends and go direct? Are there pre-existing risk-management backends that can be plugged in, or does one have to build their own risk-check systems?
 
The FIX API over at interactive is a good starting point.

If you can talk to it, then you can talk to the DMA pipes at all the banks.

Most of them are colo'd these days, and that's about as direct as you can get without buying a membership.
 
i am familiar with cme and some banks. for the cme there's a certification process but its fairly automated. for connecting to bank's backends they're all fix based with a bunch of custom tags.
 
Quote from 2rosy:

i am familiar with cme and some banks. for the cme there's a certification process but its fairly automated. for connecting to bank's backends they're all fix based with a bunch of custom tags.
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What about drop copies and clearing? How does that work? What's going in the FIX messages to describe this stuff?
 
Quote from Rationalize:

Hey, how ugly is the cme's interface?

Some of the native stuff here in asia is entirely silly.
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ilink is based off fix but we use b2bits so i dont know the details. I dont really know other exchanges but from what I have heard the cme's testing environment is one of the better ones. Testing against banks like fxtransact or morgandirect is very manual.
 
Quote from clearinghouse:

What about drop copies and clearing? How does that work? What's going in the FIX messages to describe this stuff?
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you setup the direct connection ability with an exchange and your clearer who is ultimately responsible. I dont know all the administrative details.
 
Quote from clearinghouse:

I am still using front-end applications (like Sterling, Lightspeed, etc.) to make money, but I want to push into exchange colocation and make incremental strides towards achieving an HFT infrastructure.

The market-data side is straight-forward.

It's the order-placement and associated technology I don't have full visibility into. Has anyone ever used their prop firm's existing relationships, but built their own direct connectivity into the exchange? What's involved on the back-end at a minimum to bypass front-ends and go direct? Are there pre-existing risk-management backends that can be plugged in, or does one have to build their own risk-check systems?
More...

I hope you have really, really deep pockets... you are not just talking about co-locating @ one exchange, but multiple venues... if you are trading equities you will need to be @ mahwah, carlstadt, weehawken, secaucus, carteret, and nutley... just to mention a few... but it doesnt sound to me that is your intent...

so here is what I understand... you want to achieve some level of Low Latency with your planned HFT to whomever is clearing/prime for you... in that case, what you want to is to get as close as possible to two things... their quote servers and their order entry servers...

dont worry about getting close to matching engines and sequencer servers... or dealing with pre-trade checks... leave all that up to your prime...

some primes will offer you colocation next to their QS and AES engines that you will talk to via FIX, that would be what you want to do...

then again, I dont know your strategy nor how deep your pockets are or what you are really trading, so take what I say above with a grain of salt..
 
Quote from ofthomas:

I hope you have really, really deep pockets... you are not just talking about co-locating @ one exchange, but multiple venues... if you are trading equities you will need to be @ mahwah, carlstadt, weehawken, secaucus, carteret, and nutley... just to mention a few... but it doesnt sound to me that is your intent...

so here is what I understand... you want to achieve some level of Low Latency with your planned HFT to whomever is clearing/prime for you... in that case, what you want to is to get as close as possible to two things... their quote servers and their order entry servers...

dont worry about getting close to matching engines and sequencer servers... or dealing with pre-trade checks... leave all that up to your prime...

some primes will offer you colocation next to their QS and AES engines that you will talk to via FIX, that would be what you want to do...

then again, I dont know your strategy nor how deep your pockets are or what you are really trading, so take what I say above with a grain of salt..
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My pockets aren't that deep, but I have an edge that works on my current platform. However, the faster moving the stock is, the less effective my edge is. So I have something that pays the bills, but I'm trying to grow out of my limited space.

I've spoken to a lot of prop firms and have worked with a few in the past, but the problem is that from what I can tell, not very many firms "do it right." There are always implementation quirks in the technology that make it difficult to move an edge into their space. If it isn't the technology, then the firm has problems with their cost structure because someone there isn't already doing obscene volume.

So, I was kind of hoping to incrementally push forward, adding one multicast channel at a time, getting execution latency down incrementally, expanding to new symbols, and slowly stepping it up.

It may not be feasible, since margins are so low compared to when the current crop of top tier firms started their trading. I may need to partner with someone eventually.
 
What specifically do you want to connect to? Literally directly to the exchanges? Or to your bank's SOR? If directly to the exchange, to how many of them? Do you want to drop into one major datacenter (eg NY4) and cross-connect to the others, or do you really feel you need to be co-located in each datacenter? Etc etc etc...

In my experience this is one place where sorting out your specific needs ahead of time really really pays off.

And be careful, there is a LOT of crap technology being pedalled out there.
 
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