FPGAs and low latency trading - Williston Hayes - Optiver - FPL2020

Summary

This presentation explores the intersection of FPGAs and low-latency trading, explaining how FPGAs can significantly reduce the time it takes to process trading decisions. The speaker from Optiver, a global market-making firm, discusses the architecture of an FPGA-based trading system and the unique design approach they use, focusing on minimizing latency and maximizing performance. The talk also covers the real-time impact of FPGA design on trading strategies and the dynamic, innovative solutions required in this high-paced financial environment.

Takeaways

• 😀 The speaker was initially unaware of the intersection between FPGAs and low-latency trading until a job offer from Optiver sparked interest.
• 🏦 Optiver is a global market-making firm founded in 1986, trading various financial instruments with their own capital and focusing on improving market liquidity.
• 🌐 The transition from traditional trading pits to electronic trading in data centers has significantly impacted how trades are executed, with latency becoming a critical factor.
• 🚀 The importance of low latency in trading is highlighted by the 'first come, first serve' mechanism used by exchanges to handle simultaneous orders.
• 🔍 Limitations of software-based trading systems include latency penalties from traversing the NIC, PCI Express, CPU, and memory, which FPGAs can help mitigate.
• 🛠️ FPGAs can reduce latency by handling trading logic close to the network, eliminating the need for data to pass through multiple system layers.
• 💡 The internal structure of an FPGA-based trading system includes market data handling, trading logic, order formatting, TCP stack management, and output MAC encoding.
• 🔧 Designing for FPGAs at Optiver involves avoiding pipelining to reduce latency, focusing on timing closure to save clock cycles, and custom designing IP for the hot path.
• 🔄 The use of PCI Express in FPGA trading systems is for status and control, not for the critical trading logic, which remains within the FPGA for speed.
• 🔑 Optiver's approach to FPGA design is distinguished by a tight feedback loop, allowing for rapid testing and deployment of changes, with immediate visibility of their impact.
• 💡 The trading environment at Optiver is characterized by a high pace, dynamic changes, and the need for innovative solutions to overcome challenges without introducing latency.

Q & A

What is the primary function of Optiver's trading systems?

Optiver's trading systems primarily function to improve the market by providing liquidity. They do this by buying and selling various financial instruments such as options, futures, ETFs, and stocks at prices they publish to the market.

How does Optiver's approach to using FPGAs in trading differ from other companies?

Optiver's approach to using FPGAs in trading is unique in that they focus on minimizing latency. They design their systems to be as fast as possible, avoiding pipeline registers in their critical path to reduce latency and ensure the first-come, first-serve mechanism in trading.

What is the significance of low latency in trading systems?

Low latency is crucial in trading systems because it allows for faster response times in the market. This is particularly important when multiple parties are competing to execute trades at the same time, as the first order to reach the exchange will be the one that is executed.

How does the shift from traditional trading pits to electronic trading impact the role of latency?

The shift to electronic trading has made latency a more critical factor. In electronic trading, orders are communicated through network packets, and the speed at which these packets are processed and sent to the exchange can determine the success of a trade.

What are the limitations of a software-based trading system in terms of latency?

A software-based trading system incurs latency due to the need to traverse the network interface card, PCI Express, CPU, and memory. Each of these components adds a delay, which can be significant in high-speed trading environments.

How does an FPGA-based trading system address the limitations of software-based systems?

An FPGA-based trading system addresses these limitations by placing the logic needed to make trading decisions as close as possible to the network, effectively reducing the overhead latency associated with PCI Express, CPU, and memory.

What is the role of the FPGA in the architecture of an FPGA-based trading system?

In an FPGA-based trading system, the FPGA handles tasks such as unpacking Ethernet protocols, filtering network traffic, decoding market data, and formatting orders. This allows for faster processing and decision-making compared to a software-based system.

Why is it important to filter out irrelevant network traffic in an FPGA-based trading system?

Filtering out irrelevant network traffic is important to ensure that only relevant market data reaches the trading logic. This prevents unnecessary processing of data that does not contribute to trading decisions, thereby saving processing time and reducing latency.

How does Optiver ensure that their trading systems are robust and error-free?

Optiver ensures robustness and error-free operation by implementing limit checking logic in their trading systems. This helps to prevent issues such as sending too many orders per second or sending orders with prices outside of a controlled range.

What are some of the challenges in designing an FPGA-based trading system?

Some challenges in designing an FPGA-based trading system include managing the encoding and decoding of market data and orders in market-specific formats, handling TCP/IP stack complexities, and ensuring that the system operates within tight timing constraints to minimize latency.

How does Optiver's approach to design and innovation in FPGA-based trading systems contribute to their competitive advantage?

Optiver's approach to design and innovation, such as avoiding pipeline registers, investing in the best devices, and hand-designing IP for the hotpath, contributes to their competitive advantage by allowing them to achieve lower latencies and more efficient trading systems.