The Internet has played an important role in Financial industry. In the past, transferring money needed to be done by a client using a physical book bank and going to the branch of the bank. Treading also works the same way as transferring money but improves faster due to the demand of clients. There are marketers who answer the phone from traders and input the order to the market. In the next step of improvement, traders are able to send orders themself through the application. In the present day, algorithmic trading is in the focus for traders who do not want to watch every movement of the market themself but rely on the algorithm instead to arbitrage. Let’s say that we have an algorithm that makes profits. Therefore, there is only the internet that users can improve in order to make the most profit. We can divide the improvement of the internet in 3 steps, which are basic, intermediate (smart NIC) and advanced (Alveo card). This article is summarized from white paper from https://www.fujitsu.com/us/imagesgig5/Solarflare-Low-Latency-TestReport.pdf .
The picture below shows the summary performance from each method from receiving data packages and sending packages out.
The basic improvement of the internet can be achieved by coding the algorithm to send and receive market data and order as soon as the algorithm finishes the calculation. All the improvements are developed based on software only. The performance of this method is approximately around 1 ms according to the reference.
The intermediate development achieves the better performance from the previous method due to high-performance and low-latency server. This method is a mixture of software development and the helping of a smart Network Interface card (NIC). When we add more help from the hardware, which is smart NIC. Therefore, average performance can reach up to sub-millisecond. However, This solution still relies on complete set hardware from the manufacturer.
The advanced solution is using an Alveo card. The Alveo card is developed by software but the hardware is completely different from those previous methods. Those previous methods are based on software that is running on a computer whether high-performance computer or personal computer. However, the software of this solution is running on a PCI-e card which can transform itself to any algorithm. So, it means that you can build your own dedicated electronic chip. As a result, the performance is better than the others as shown in the picture above.
To sum up, those methods are a trend for trading nowadays. The basic method benefit the most depends on optimization of software. The second solution is doing better due to the performance of upgraded computers and high-speed smart NIC. And the last option is the highest performance due to all algorithms running on the hardware, no need to worry about software handling.