LOW-LATENCY SYSTEM DESIGN FOR HIGH-FREQUENCY TRADING: ARCHITECTURES AND OPTIMIZATION STRATEGIES

Asiyanbola Olaoluwa Ebenezer; Samson Precious Loveth; Iyiola Ifeoluwa Johnson; Awogbade Kehinde; Omisope Abiodun Oluwasegun.

doi:10.5281/zenodo.21501606

Abstract

High frequency trading (HFT) is one of the most technically challenging areas in today's financial markets, where the concurrent optimization of hardware, software, networking and algorithmic systems is required to deliver execution times in the micro seconds and nanoseconds. In this paper, the authors have introduced a holistic overview of low-latency system design principles and strategies used in the modern HFT architectures. The study reviews the entire HFT technology stack, from co-location, kernel bypass networking, field-programmable gate array (FPGA) acceleration, lock-free data structures, and cache-optimized memory management, all found in peerreviewed literature, industry white papers, and technical analyses from the past seven years (2017–2024). In addition to risk management frameworks that need to be executed in the same ultra-low latency environment, the review examines algorithmic strategies such as market microstructure exploitation, statistical arbitrage and latency arbitrage. The results show that competitive advantage in HFT depends on the integration of the hardware and software co-design in all the layers of the system. The paper concludes by addressing some of the new trends which are expected to modify the latency landscape, such as photonic networking, acceleration of machine learning inferences, and quantum-resistant cryptography, during the next decade.

Keywords

High-Frequency Trading; Low-Latency Systems; FPGA Acceleration; Co-location; Kernel Bypass Networking; Market Microstructure; Algorithmic Trading; Order Execution Optimization; Cache-Optimized Memory; Statistical Arbitrage

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