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high frequency trading (HFT)

High frequency trading( HFT) is a trading concept for securities and commodities that is carried out at the highest transfer speed with the shortest delay times. High frequency trading of securities is based on high performance computing( HPC), in which a high number of transactions are executed in the shortest possible time. This can be many millions of transactions per day. It is trading between computers, without human intervention.

In high-frequency trading, computers trade according to predetermined complex algorithms, on the one hand observing and analyzing the various price movements in the markets, and on the other hand executing orders according to certain decision-making algorithms depending on the market conditions.

Since in high-frequency trading the fastest transaction with the least delay time is usually the most efficient, extremely powerful computers and communication networks with extremely low latency are used for HFT trading. Corresponding latency-sensitive services are provided, for example, by 5th generation( 5G) mobile networks with ultra-high reliability and low latency communication( uRLLC). High-speed trading is all about milliseconds. Some transactions are already executed when the prices in the second or third digit behind the decimal point add up in favor of the trader. It all adds up, as millions of securities or commodities are traded in a single HFT transaction.

Modern HFT concepts also minimize the transit time in the transmission media. Since the delay times, which are determined by the length of the transmission media and the number of switches with their switching times, cannot be easily reduced, the data centers for high-frequency trading are relocated close to the exchanges to keep the transmission paths as short as possible.

Englisch: high frequency trading - HFT
Updated at: 15.06.2021
#Words: 269
Links: frequency (f), hardware fault tolerance (SIL) (HFT), delay (DEL), high performance computing (HPC), high performance cluster (HPC)
Translations: DE

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