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Hacking Korea: The accidental HFT firm

Published in Automated Trader Magazine Issue 40 Q3 2016

Necessity is the mother of invention. This is true in all areas of life, including the domain of high frequency trading. Discover how some impressive hardware and software engineering over the years led to capturing significant market share in KOSPI options.


Thomas 'Neo' Anderson has worked his way through the rabbit hole of technology to emerge on the other side with 20 years of experience in arcane arbitrage techniques and options market making. In his spare time he separates red pills from blue pills and knows Kung-Fu.

I started my HFT career at one of the larger American trading firms as a C++ jockey. On my first day I was greeted by full panes of glass boasting glorious Sydney Harbour views which were modestly obscured by a hand-scrawled 'less than 2ms' on that glass. This was the main goal for the dozen of us in IT. That wasn't my remit at the start though. First things first...


One of the desk guys had an idea for trading tailor-made combinations on the Australian Stock Exchange (ASX). That is, equity option spreads and combinations, along with their associated hedges. He needed something that could handle a bunch of intricate auto-trading rules that could be integrated with the Orc front-end being used for ASX trading. It was the early 2000s, so I developed a quick resizing UI with VB6 for the Windows 2000 desktops. This involved C++, Boost, multi-threading with a Spirit parser for the Orc integration at the back end. Orc calculated the binomial or trinomial trees for the ASX-listed American options on demand. For my binomial pricing code, I used simple Haug VBA code that I had transliterated to C++.

However, Orc didn't calculate solely on demand, rather it used simple memoization for pricing. If the parameters were the same, Orc remembered, rather than recalculated the price. Our Orc Trader had been too slow to beat Timber Hill's custom platform or IMC's exclusively-licensed Orc Liquidator, the fastest vendor system at the time. The stack seemed too lame to be latency competitive, no matter what tricks I could come up with. However, with a large price cache from the busy C++ threads diligently filling out a multi-dimensional cache of option prices by parameter proximity for easy interpolation, suddenly we could hit trades that were previously unhittable.

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