Understanding High-Frequency Trading Terminology

The upsurge of investor interest in high-frequency trading (HFT) important for industry professionals to come up to speed with HFT terminology. A number of HFT terms have their origins in the computer networking/systems industry, which is to be expected given that HFT is based on incredibly fast computer architecture and state-of-the-art software. We briefly discuss below 10 key HFT terms that we believe are essential to gain an understanding of the subject. Locating computers owned by HFT firms and proprietary traders in the same premises where an exchange’s computer servers are housed. This enables HFT firms to access stock prices a split second before the rest of the investing public. Co-location has become a lucrative business for exchanges, which charge HFT firms millions of dollars for the privilege of “low latency access.” As Michael Lewis explains in his book Flash Boys, the huge demand for co-location is a major reason why some stock exchanges have expanded their data centers

The upsurge of investor interest in high-frequency trading (HFT) important for industry professionals to come up to speed with HFT terminology. A number of HFT terms have their origins in the computer networking/systems industry, which is to be expected given that HFT is based on incredibly fast computer architecture and state-of-the-art software. We briefly discuss below 10 key HFT terms that we believe are essential to gain an understanding of the subject. Locating computers owned by HFT firms and proprietary traders in the same premises where an exchange’s computer servers are housed. This