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Fast Network and Messaging Protocols in Trading Systems

Article Quant Q&A · Author: Julius Hamilton
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Summary

The document distinguishes transport protocols from presentation or wire formats used to exchange trading data. It says firms colocated in the same data center often use raw UDP for transport, and notes Aeron as another option that has gained use. For market data and participant messaging, it names ITCH and SBE; firms may also use proprietary protocols for communication between internal systems.

These are examples rather than a performance comparison: the document provides no latency measurements, implementation details, or criteria for choosing among protocols. Its guidance is scoped to the question of fast transmission and does not explain reliability, message recovery, network design, or how protocol choice affects a full trading system.

Key ideas

  • Raw UDP is commonly used for transport by firms colocated in the same data center.
  • Aeron is another transport option mentioned for trading systems.
  • ITCH and SBE are examples of presentation-layer formats used between markets and participants.
  • Firms may develop proprietary wire protocols for communication between internal systems.

Tags

ExecutionMarket microstructureHigh-frequency trading
Full text
# Which network protocols do trading systems use for speed?


# Which network protocols do trading systems use for speed?












Someone told me that trading systems are very time-dependent and they must use network protocols that ensure speed.

Which network protocols do they use to ensure fast transmissions?

What’s an example of such a system?

Thank you

## Answer by databento (score 4)

https://quant.stackexchange.com/a/70348

Guessing from your post that you're asking about the transport layer. Most financial firms prefer to use raw UDP for transport when they're colocated in the same data center. Aeron is another one that has been gaining some steam.

As for the presentation layer, ITCH and SBE are fairly popular these days between markets and participants, however firms might just write their own proprietary wire protocol when they're just communicating between internal systems.

Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.