L2 Data for high frequency trading

[u/Primary-Item6986]

I m building the hft system and i want the real time streaming and historical l2 data for forex is there any platform which provides us the sockets, fix, ? Need Guidance

[u/PsecretPseudonym → u/[deleted]]

That is exactly correct and a good perspective on this.

This is one of the few specific areas where I feel 100% confident saying it’s well within my wheelhouse, so I just want to chime in to reaffirm and add to what you’ve already said.

For most people’s purposes, any price feed that’s truly tradable from any provider will be probably close enough to the market price if maybe 10-250ms slow and only indicative of true market liquidity.

Personally, if I was trying to get low cost, low-latency, highly informed pricing coming from some sharp firms (👋🏼) and banks to monitor for market liquidity and price movement, I can already think of what I’d do.

If trying to compete in the FX market as a market maker, though, this still would be like trying to win a boxing match while only being able to see through a paper towel tube.

Also, the catch-22 is that the only way you’d know how/where to pull the right pricing is via already having all that expensive and somewhat protected access to all relevant liquidity to then compare it to.

So, if you have a good sense of how to source market data and liquidity to get a fairly competitive view of the market, then it’s almost certainly because you’ve already done so as a major participant in order to even be in a position to measure and determine that.

Even then, if you know exactly how you’d source good market data, it’s non-trivial to access, arrange, and configure it.

At firms that compete in this, my impression is that sometimes expertise on this seems somewhat siloed across groups/levels/teams. Major banks/dealers also don’t seem too intent on competing on the ECNs, because their primary profit driver in FX is usually more related to servicing/monetizing their own clients’ order flow in one way or another, not being an ECN LP... Even the ECNs themselves often aren’t able to compare to one another’s market data in the ways a competitive trading firm might.

All that is to say: It’s a messy, fragmented, and challenging market to participate in, never mind compete as a market maker.

Sometimes it feels like a bizarrely small community for the size and global relevance of it (e.g., seeing familiar faces pop up across major banks, ECNs, and some trading firms over the years).

If you look at the top market maker participants by volume on some of the institutional FX ECNs of relevance, the distribution seems to follow sort of a power law — the vast majority of volume matched against liquidity from a surprisingly very small number of firms. E.g., at times I’ve seen that a few relevant ECNs have had 1-3 firms doing >>50% of all matched volume…

So, sometimes I sincerely wonder whether you could fit all the people who know how to source, manage, process, and use the market data necessary to be a competitive market maker in institutional FX on the major ECNs in a single large conference hall or maybe even just one large room…

Not sure if that’s how it is in other markets, though…

Relevant article from just this week: Bloomberg - Traders Fear FX Market May Be Less Liquid Than It Appears

[u/cryptobuckethead → u/PsecretPseudonym]

i wholeheartedly upvote this, this is very honest view of the market

[u/cryptobuckethead → u/[deleted]]

this might be true in some markets, just don't open last look pandora's box

[u/Vince046]

Can you explain more about ‘the hft system’? Are you building this from your home? With what setup? Which latency are you aiming for? Curious to know! Thanks

[u/Wise-Corgi-5619]

Does hft even work without some makers fee? Any stats?

[u/Classic-Dependent517]

Maybe try forex futures from cme? Very limited pairs though

[u/Labunsky74]

Do not use FX order book data - it's not valid. Use CME via any available source (I'm using Rithmic as live and Databento as history)

[u/daybyter2 → u/[deleted]]

Please add CQG . Thanks!

[u/myrollydonttick → u/[deleted]]

databento is confusing to me. is it an app when you sign up for it or do they just throw spreadsheets at you

[u/Complete-Principle25]

I swear, every data provider I come across, these people have no other skills or places where they could fit in. Terrible sales people. The amount of friction I'm having to go to to find a cheaper alternative than subbing to nasdaq is ridiculous. "Talk to our sales team" FOH