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Publication - Professor Dave Cliff

    A Cloud-Native Globally Distributed Financial Exchange Simulator for Studying Real-World Trading-Latency Issues at Planetary Scale

    Citation

    Miles, B & Cliff, D, 2019, ‘A Cloud-Native Globally Distributed Financial Exchange Simulator for Studying Real-World Trading-Latency Issues at Planetary Scale’. in: M Affenzeller, A Bruzzone, F Longo, G Pereira (eds) Proceedings of the 31st European Modelling and Simulation Symposium. DIME University of Genoa, Lisbon, Portugal, pp. 294-303

    Abstract

    We describe a new public-domain open-source simulator of an electronic financial exchange, and of the traders that interact with the exchange, which is a truly distributed and cloud-native system that been designed to run on widely available commercial cloud-computing services, and in which various components can be placed in specified geographic regions around the world, thereby enabling the study of planetary-scale latencies in contemporary automated trading systems. Latency, the speed at which a trader can react to changes in the market, is a key concern in current financial markets but is difficult to study using conventional market simulators, and is extremely difficult to study "in the wild" because of the financial and regulatory barriers to entry in conducting experimental work on real financial exchanges. Our simulator allows an exchange server to be launched in the cloud, specifying a particular geographic zone for the cloud hosting service; automated-trading clients which attach to the exchange can then also be launched in the cloud, in the same geographic zone and/or in different zones anywhere else on the planet, and those clients are then subject to the real-world latencies introduced by planetary-scale cloud communication interconnections. In this paper we describe the design and implementation of our simulator, called DBSE, which is based on a previous public-domain simulator, extended in ways that are partly inspired by the architecture of the real-world Jane Street Exchange, which relies fundamentally on UDP and TCP network communications protocols and which implements a subset of the FIX de facto standard protocol for financial information exchange. We show results from an example in which the exchange server is remotely launched on a server located in London (UK), with trader clients running in Ohio (USA) and Sydney (Australia). We discuss how our simulator could be further used to study planetary-scale latency arbitrage in financial markets.

    Full details in the University publications repository