FPGAs (Field-Programmable Gate Arrays) are widely used in High-Frequency Trading (HFT) because they offer unique advantages in speed, determinism, and parallelism — all critical in the race to execute financial trades milliseconds (or microseconds) ahead of competitors.
Here’s why FPGAs are used in HFT:
1. Ultra-Low Latency
- FPGAs operate at the hardware level, bypassing the delays introduced by software stacks, operating systems, and even CPUs.
- They process data with latencies as low as tens of nanoseconds, whereas traditional software might take microseconds to milliseconds.
2. Deterministic Performance
- CPUs experience jitter (variation in execution time) due to multitasking, context switches, and interrupts.
- FPGAs provide consistent, predictable execution times, which is crucial in trading where even a slight delay can result in missed opportunities.
3. Parallelism
- FPGAs can run many tasks simultaneously in hardware (true parallelism), unlike CPUs which switch between tasks.
- This is ideal for analyzing multiple market data feeds or executing numerous strategies in parallel.
4. Direct Market Data Processing
- FPGAs can be directly connected to network interfaces and process market data (e.g., FIX/FAST protocols) as it arrives, without passing through the kernel or software stack.
- This allows for real-time reaction to market changes with minimal overhead.
5. Custom Hardware Logic
- Traders can implement custom trading algorithms or filtering mechanisms directly in the FPGA.
- This enables extremely fast decision-making and order placement.
6. Offloading Work from CPU
Time-critical operations (e.g., packet parsing, checksum calculations, order book management) can be done in the FPGA, freeing up the CPU for higher-level strategy decisions.
7. Competitive Edge
- In HFT, being faster than competitors — even by a microsecond — can translate to substantial profits.
- FPGAs offer a hard-to-match speed advantage that high-end software solutions often cannot provide.
Typical FPGA Use Cases in HFT:
- Market data feed handlers
- Order book construction
- Pre-trade risk checks
- Low-latency order execution
- Packet filtering and shaping