SYS-CON MEDIA Authors: Pat Romanski, Liz McMillan, Yeshim Deniz, Elizabeth White, Courtney Abud

Blog Feed Post

Hope, FPGA’s, High Frequency Trading and the New Market Access Rules

I recently became aware of an emerging practice most likely being implemented by clearing companies at the low end of the capitalization sprectrum offering a unique solution to the recent Market Access Rules.

NO UN-FILTERED DIRECT ACCESS

What the SEC is trying to do is remove, or reduce the opportunity for either crooks, idiots, or algo’s gone wild from doing bad things to the market. Under the new rules, order flow needs to be monitored. This is not something that the HFT crowd like to hear, because it slows them down. So a couple of innovative idiots got together and came up with the solution that I’m going to describe here.

HOPE IS NOT A STRATEGY

Let alone a comprehensive compliance or surveillance strategy. What the idiots are doing is putting a ‘black box’ between the HFT firms FIX engines and the execution venues. The box, most likely powered by an FPGA device, scans the outbound order flow, and if it finds something it doesn’t like, it messes up the payload of the FIX order so that the execution venue (hopefully) rejects the message. Why is this done this way? Because the ‘black box’ is both out of process – both the source of orders and resulting executions, etc. are behind FIX engines, and because the ‘black box’ isn’t actually maintaining connections between the HFT firm’s order generators and execution venue.

A PICTURE IS WORTH A MILLION REJECTS

This is a little complicated, so let’s look at this picture:

In the diagram above, the ‘black box’ isn’t maintaining FIX connections to either the HFT’s order generators or the execution venue.  So, the ‘black box’ can’t just reject the order if it’s out of bounds back to the order generator because then the FIX sequence #’s get all mixed up.  There’s a little more to this, but you get the general idea.

YES, THIS IS REAL, AND I’M NOT KIDDING

So, this whole thing is designed so that an examiner can come into the Olde Thyme Highe Frequency Trading Shoppey and be escorted into the back room and shown the shiny box.  Wow.  Are you serious.  ”Look, we’re making sure that this firm isn’t doing anything wrong – we’re actively monitoring the flow and if they do something we don’t like, we shut them down.”  Right, they shut down the order flow attached to the box.  What about the order generators that the examiner doesn’t see. There’s a host of issues here, but we’re going to focus on one – and it’s a doozy.

DENIAL OF SERVICE ATTACKS

So, we’ve installed the OMICRON 5000 monitoring device and our HFT/algo team is ready to do business.  And everything is fine.  They’re trustworthy chaps and have no intention of gaming the system.  (cough cough).  But their first algo goes completely nuts.  And get’s shut down by the clearing firm.  But it doesn’t really get shut down.  Instead, it’s sending 1000′s of malformed FIX messages to an execution venue per second.  Or maybe 10,000′s of malformed FIX messages to many execution venues.  Wow.  In the internet world, we call this a denial of service attack – flood a destination with more traffic that it can handle.  And while the execution venues can handle normal traffic, what about rejecting every message? Is every execution venue out there ready for this?  I don’t think so.  I’ve been involved with FIX longer than I’ll admit to in public, and I’ve seen a lot of testing  - “Yeah, reject worked.  It worked fine.  I mean, we never thought they’d be sending 1,000′s of orders a second that would all reject…”

I DON’T KNOW

What should be done about this.   I have lots of ideas about surveillance and how it should be done.  But I don’t have any thoughts about this.  Mostly because I never thought anyone would be so stupid as to ever actually deploy this type of ‘solution.’  Where’s the SEC when you need them?

THANKS FOR READING

PrintFriendly

Read the original blog entry...

More Stories By Colin Clark

Colin Clark is the CTO for Cloud Event Processing, Inc. and is widely regarded as a thought leader and pioneer in both Complex Event Processing and its application within Capital Markets.

Follow Colin on Twitter at http:\\twitter.com\EventCloudPro to learn more about cloud based event processing using map/reduce, complex event processing, and event driven pattern matching agents. You can also send topic suggestions or questions to [email protected]

Latest Stories
At CloudEXPO Silicon Valley, June 24-26, 2019, Digital Transformation (DX) is a major focus with expanded DevOpsSUMMIT and FinTechEXPO programs within the DXWorldEXPO agenda. Successful transformation requires a laser focus on being data-driven and on using all the tools available that enable transformation if they plan to survive over the long term. A total of 88% of Fortune 500 companies from a generation ago are now out of business. Only 12% still survive. Similar percentages are found throug...
Technology has changed tremendously in the last 20 years. From onion architectures to APIs to microservices to cloud and containers, the technology artifacts shipped by teams has changed. And that's not all - roles have changed too. Functional silos have been replaced by cross-functional teams, the skill sets people need to have has been redefined and the tools and approaches for how software is developed and delivered has transformed. When we move from highly defined rigid roles and systems to ...
The Kubernetes vision is to democratize the building of distributed systems. As adoption of Kubernetes increases, the project is growing in popularity; it currently has more than 1,500 contributors who have made 62,000+ commits. Kubernetes acts as a cloud orchestration layer, reducing barriers to cloud adoption and eliminating vendor lock-in for enterprises wanting to use cloud service providers. Organizations can develop and run applications on any public cloud, such as Amazon Web Services, Mic...
Because Linkerd is a transparent proxy that runs alongside your application, there are no code changes required. It even comes with Prometheus to store the metrics for you and pre-built Grafana dashboards to show exactly what is important for your services - success rate, latency, and throughput. In this session, we'll explain what Linkerd provides for you, demo the installation of Linkerd on Kubernetes and debug a real world problem. We will also dig into what functionality you can build on ...
Implementation of Container Storage Interface (CSI) for Kubernetes delivers persistent storage for compute running in Kubernetes-managed containers. This future-proofs Kubernetes+Storage deployments. Unlike the Kubernetes Flexvol-based volume plugin, storage is no longer tightly coupled or dependent on Kubernetes releases. This creates greater stability because the storage interface is decoupled entirely from critical Kubernetes components allowing separation of privileges as CSI components do n...
With container technologies widely recognized as the cloud-era standard for workload scaling and application mobility, organizations are increasingly seeking to support container-based workflows. In particular, the desire to containerize a diverse spectrum of enterprise applications has highlighted the need for reliable, container-friendly, persistent storage. However, to effectively complement today's cloud-centric container orchestration platforms, persistent storage solutions must blend relia...
Applications with high availability requirements must be deployed to multiple clusters to ensure reliability. Historically, this has been done by pulling nodes from other availability zones into the same cluster. However, if the cluster failed, the application would still become unavailable. Rancher’s support for multi-cluster applications is a significant step forward, solving this problem by allowing users to select the application and the target clusters, providing cluster specific data. Ranc...
AI and machine learning disruption for Enterprises started happening in the areas such as IT operations management (ITOPs) and Cloud management and SaaS apps. In 2019 CIOs will see disruptive solutions for Cloud & Devops, AI/ML driven IT Ops and Cloud Ops. Customers want AI-driven multi-cloud operations for monitoring, detection, prevention of disruptions. Disruptions cause revenue loss, unhappy users, impacts brand reputation etc.
JFrog, the DevOps technology leader known for enabling liquid software via continuous update flows, was honored today with two prestigious awards as part of DevOps.com's annual DevOps Dozen. The awards recognized both JFrog Artifactory as the "Best DevOps Commercial Solution" and JFrog Co-Founder and CEO, Shlomi Ben Haim, as the "Best DevOps Solution Provider Executive". DevOps.com holds the DevOps Dozen awards annually to recognize the best of the best in the global DevOps marketplace.
Eggplant, the customer experience optimization specialist, announced the latest enhancements to its Digital Automation Intelligence (DAI) Suite. The new capabilities augment Eggplant’s continuous intelligent automation by making it simple and quick for teams to test the performance and usability of their products as well as basic functionality, delivering a better user experience that drives business outcomes.
Is advanced scheduling in Kubernetes achievable?Yes, however, how do you properly accommodate every real-life scenario that a Kubernetes user might encounter? How do you leverage advanced scheduling techniques to shape and describe each scenario in easy-to-use rules and configurations? In his session at @DevOpsSummit at 21st Cloud Expo, Oleg Chunikhin, CTO at Kublr, answered these questions and demonstrated techniques for implementing advanced scheduling. For example, using spot instances and co...
Conor Delanbanque has been involved with building & scaling teams in the DevOps space globally. He is the Head of DevOps Practice at MThree Consulting, a global technology consultancy. Conor founded the Future of DevOps Thought Leaders Debate. He regularly supports and sponsors Meetup groups such as DevOpsNYC and DockerNYC.
As you know, enterprise IT conversation over the past year have often centered upon the open-source Kubernetes container orchestration system. In fact, Kubernetes has emerged as the key technology -- and even primary platform -- of cloud migrations for a wide variety of organizations. Kubernetes is critical to forward-looking enterprises that continue to push their IT infrastructures toward maximum functionality, scalability, and flexibility. As they do so, IT professionals are also embr...
At CloudEXPO Silicon Valley, June 24-26, 2019, Digital Transformation (DX) is a major focus with expanded DevOpsSUMMIT and FinTechEXPO programs within the DXWorldEXPO agenda. Successful transformation requires a laser focus on being data-driven and on using all the tools available that enable transformation if they plan to survive over the long term. A total of 88% of Fortune 500 companies from a generation ago are now out of business. Only 12% still survive. Similar percentages are found throug...
The use of containers by developers -- and now increasingly IT operators -- has grown from infatuation to deep and abiding love. But as with any long-term affair, the honeymoon soon leads to needing to live well together ... and maybe even getting some relationship help along the way. And so it goes with container orchestration and automation solutions, which are rapidly emerging as the means to maintain the bliss between rapid container adoption and broad container use among multiple cloud host...