Full low-latency forex setup?

H

Hide on bush

Hey,

what would be the cost and needed to set-up a low-latency operation for forex?

Here: https://www.elitetrader.com/et/threads/hft-strategies-for-fx-anyone.309821/ they talk about colocation, clearing with companies, venues like currenex, hotspot, servers etc.

How does it actually work from start to finish to set-up a whole operation.

Do i just open an account with currenex and rent a sever?

Im good at coding and have a strategy that i want to try but execution and cost per lot is just too high with a normal broker (currently using IC Markets).

Maybe someone has experience and wants to answer the question.
 
I’m not an expert, but forex is a bucket shop, and no bucket shop will allow you to game their customers… that’s what bucket shops are for. So you can’t trade HFT with forex unless you have a relationship with them.
 
Low-latency will not remove the spread you have when trading forex.
Besides, with forex, you're trading mostly with the broker, not against other traders.
But I know nothing about forex. So take my advice with a grain of salt.
 
Wintergasp is not using a low latency setup with 100-150ms latency. I would not even call sub 10ms latency a HFT setup. Cross connection usually yields sub 5ms but when you have above 10ms while your server is in the same rack as the exchanges matching engine is running on + a 5ft long cable to the machine, you're either getting fleeced or you're clearly doing something wrong.

That said we are not talking about cross exchange arbs where one ECN sits in NY and the other one in Tokyo since your bottleneck is not the exchange connection but the distance between venues...which is where microwave towers and private internet cables are coming into play and this is an entire new ballgame that probably only a handful of players are able to dabble in.

Colo - costs depend on the venue you're trading on but my best guess is you don't get anything useful for below 100k/month depending on what you want to do.

If you quote and you're into queue priority stuff that needs latest possible order cancels then you might be ok, but as soon as you do cross venue arb, there is no way a retailer or solo operator could stem the costs for above mentioned reasons.

Also think about that "good at coding" thing you've mentioned.
You'll need a very performant feed handler, you'll need a performant time series data base, you'll need an efficient execution algorithm and you need a quick model that calculates the parameters for the execution algo.
Even for the simplest stuff like a quote machine that prices off of a triangulated synthetic there will be huge performance differences depending on which language you code and how efficient your code is.
You might get good results in C because it's easy to write fast code in C but you're at a disadvantage compared to efficiently written code in Erlang or similar niche languages.

If you just want to do some scalping based on MT4 tickcharts, get a virtual machine in the same data centre your execution venue is located in and ask for a cross connection. These are a couple of 100 bucks a month
 
MrMuppet said:
Wintergasp is not using a low latency setup with 100-150ms latency. I would not even call sub 10ms latency a HFT setup. Cross connection usually yields sub 5ms but when you have above 10ms while your server is in the same rack as the exchanges matching engine is running on + a 5ft long cable to the machine, you're either getting fleeced or you're clearly doing something wrong.

That said we are not talking about cross exchange arbs where one ECN sits in NY and the other one in Tokyo since your bottleneck is not the exchange connection but the distance between venues...which is where microwave towers and private internet cables are coming into play and this is an entire new ballgame that probably only a handful of players are able to dabble in.

Colo - costs depend on the venue you're trading on but my best guess is you don't get anything useful for below 100k/month depending on what you want to do.

If you quote and you're into queue priority stuff that needs latest possible order cancels then you might be ok, but as soon as you do cross venue arb, there is no way a retailer or solo operator could stem the costs for above mentioned reasons.

Also think about that "good at coding" thing you've mentioned.
You'll need a very performant feed handler, you'll need a performant time series data base, you'll need an efficient execution algorithm and you need a quick model that calculates the parameters for the execution algo.
Even for the simplest stuff like a quote machine that prices off of a triangulated synthetic there will be huge performance differences depending on which language you code and how efficient your code is.
You might get good results in C because it's easy to write fast code in C but you're at a disadvantage compared to efficiently written code in Erlang or similar niche languages.

If you just want to do some scalping based on MT4 tickcharts, get a virtual machine in the same data centre your execution venue is located in and ask for a cross connection. These are a couple of 100 bucks a month
More...

Never said i want to do HFT, sorry fit that came across differently.
Dont worry about feed handlers, limit order books, programming lanuage etc.
That is failing this questions topic.

I simply wanted to know how people would set up a LOW LATENCY FOREX trading operation and did not want any tips about how C code compares to Erlang or other languages.

Talking about triang arbitrage is also too far...

Simply just HOW one would setup a low latency operation like for example:

open account with Baxter-FX, cross connect in EQ4 with XXX, , servers from XXX,
fees one can get when negotianing, etc.




Thanks anyway.
 
How the heck would you have low latency setup in forex? Are you calling on each Central Bank or all the bank dealing desks to provide colocation services?

No, most will go through a broker who will wink* wink* give you the HFT connection.

Most retail orders go thru the broker's order matching system where they get "first peek".

With HFT stock and futures market, you collocate at the exchange and see the book of orders as quickly as they change. You get your orders filled at the exchange with your ID attached to the trade and that info is forwarded to the broker for clearing and settlement. You are practically a member of the exchange.

So, what services do Central banks provide to non-registered forex dealers or even forex brokers?

I think the closest you get to minimize the "layers" is Citibank forex or other "Money Center" bank. And of course, that would be offered at the highest customer classification that may or may not be published information.
 
Stock bucketshops: Robin hood and cfd brokers.
Fx bucketshops: unregulated brokers or regulated in shady jurisdictions, those who offer more than 50:1 leverage, those who accept credit cards as funding source, those who don't use a pass through stp model, those whose spread in eurusd is wider than 0.3pips or 0.4 for usdcad or other liquid pairs.

As you see, bucketshops are not defined along the lines of asset classes but by how they conduct business. Fx is a reputable asset class itself and probably the cleanest way to trade risk on/off strategies. Also most likely the absolutely cheapest way to trade equivalent notional.

qlai said:
I’m not an expert, but forex is a bucket shop, and no bucket shop will allow you to game their customers… that’s what bucket shops are for. So you can’t trade HFT with forex unless you have a relationship with them.
More...
 
Not sure why it makes sense to chime in if you by your own admission know nothing about the subject matter. I like most of your other posts you seek a smart cookie. Though in FX you trade in the same way with risk takers, hedges, and those who aim to offload risk as you do in any other asset class. Banks are not really liquidity providers other than in the very short term. They offload or hedge their exposure almost instantly, especially in electronic markets. In the end risk is transfered between those who like to take on risk from those who like to offload risk.

rb7 said:
Low-latency will not remove the spread you have when trading forex.
Besides, with forex, you're trading mostly with the broker, not against other traders.
But I know nothing about forex. So take my advice with a grain of salt.
More...
 
The first thing you need to know and do is understand how much size you will be approximately trading per month in US equivalent notional. This is the starting point of any serious negotiation discussion with a reputable fx broker. Size determines how much commission you will be paying which will either make or break your entire operation as function of your turnover and profit margin. Then if you are comfortable with that the broker is quoting you, you want to hook into their api on a demo account to receive their live quotes and measure their spreads over time. Make sure you insist that stream is based on tradable prices and sizes and inquire how much you can comfortably execute in one clip. The broker most likely will inquire about your trading approach because both sides want to feel comfortable about the arrangements. If any of the conversations don't go along the lines I just described then run, don't walk, you are most likely not dealing with a reputable broker. You may stay with IB but not sure they are sufficient in terms of latency requirements you have. Their commissions are fixed (for you at least) but their spreads are top notch. But you can't fire more than 5mil or so per clip. That's their retail business model. You may get better rates at Baxter, Pepperstone, Lmax,... but their spreads are wider on average.

Hide on bush said:
Never said i want to do HFT, sorry fit that came across differently.
Dont worry about feed handlers, limit order books, programming lanuage etc.
That is failing this questions topic.

I simply wanted to know how people would set up a LOW LATENCY FOREX trading operation and did not want any tips about how C code compares to Erlang or other languages.

Talking about triang arbitrage is also too far...

Simply just HOW one would setup a low latency operation like for example:

open account with Baxter-FX, cross connect in EQ4 with XXX, , servers from XXX,
fees one can get when negotianing, etc.




Thanks anyway.
More...
 
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