Evaluating the Latency Impact of IPv6 on a High Frequency Trading System Nereus Lobo, Vaibhav Malik, Chris Donnally, Seth Jahne, Harshil Jhaveri
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[email protected] A capstone paper submitted as partial fulfillment of the requirements for the degree of Masters in Interdisciplinary Telecommunications at the University of Colorado, Boulder, 4 May 2012. Project directed by Dr. Pieter Poll and Professor Andrew Crain. 1 Introduction Employing latency-dependent strategies, financial trading firms rely on trade execution speed to obtain a price advantage on an asset in order to earn a profit of a fraction of a cent per asset share [1]. Through successful execution of these strategies, trading firms are able to realize profits on the order of billions of dollars per year [2]. The key to success for these trading strategies are ultra-low latency processing and networking systems, henceforth called High Frequency Trading (HFT) systems, which enable trading firms to execute orders with the necessary speed to realize a profit [1]. However, competition from other trading firms magnifies the need to achieve the lowest latency possible. A 1 µs latency disadvantage can result in unrealized profits on the order of $1 million per day [3]. For this reason, trading firms spend billions of dollars on their data center infrastructure to ensure the lowest propagation delay possible [4]. Further, trading firms have expanded their focus on latency optimization to other aspects of their trading infrastructure including application performance, inter-application messaging performance, and network infrastructure modernization [5].