Designing Stock Exchange

Requirements​

• order-matching system for buy and sell orders. Types of orders:
  • Market Orders
  • Limit Orders
  • Stop-Loss Orders
  • Fill-or-Kill Orders
  • Duration of Orders
• high availability and low latency for millions of users
  • async design - use messaging queue extensively (btw. side-effect: engineers work on one service pub to a queue and does not even know where exactly is the downstream service and hence cannot do evil.)

Architecture​

Reverse Proxy

Components and How do they interact with each other.​

order matching system​

• shard by stock code
• order's basic data model (other metadata are omitted): Order(id, stock, side, time, qty, price)
• the core abstraction of the order book is the matching algorithm. there are a bunch of matching algorithms(ref to stackoverflow, ref to medium)
• example 1: price-time FIFO - a kind of 2D vector cast or flatten into 1D vector
  • x-axis is price
  • y-axis is orders. Price/time priority queue, FIFO.
    • Buy-side: ascending in price, descending in time.
    • Sell-side: ascending in price, ascending in time.
  • in other words
    • Buy-side: the higher the price and the earlier the order, the nearer we should put it to the center of the matching.
    • Sell-side: the lower the price and the earlier the order, the nearer we should put it to the center of the matching.

x-axis

with y-axis cast into x-axis

Id   Side    Time   Qty   Price   Qty    Time   Side
---+------+-------+-----+-------+-----+-------+------
#3                        20.30   200   09:05   SELL
#1                        20.30   100   09:01   SELL
#2                        20.25   100   09:03   SELL
#5   BUY    09:08   200   20.20
#4   BUY    09:06   100   20.15
#6   BUY    09:09   200   20.15

Order book from Coinbase Pro

The Single Stock-Exchange Simulator

• example 2: pro-rata

How to implement the price-time FIFO matching algorithm?

• shard by stock, CP over AP: one stock one partition
• stateful in-memory tree-map
  • periodically iterate the treemap to match orders
• data persistence with cassandra
• in/out requests of the order matching services are made through messaging queues
• failover
  • the in-memory tree-maps are snapshotting into database
  • in an error case, recover from the snapshot and de-duplicate with cache

How to transmit data of the order book to the client-side in realtime?

• websocket

How to support different kinds of orders?

• same SELL or BUY: qty @ price in the treemap with different creation setup and matching conditions
  • Market Orders: place the order at the last market price.
  • Limit Orders: place the order with at a specific price.
  • Stop-Loss Orders: place the order with at a specific price, and match it in certain conditions.
  • Fill-or-Kill Orders: place the order with at a specific price, but match it only once.
  • Duration of Orders: place the order with at a specific price, but match it only in the given time span.

Orders Service​

• Preserves all active orders and order history.
• Writes to order matching when receives a new order.
• Receives matched orders and settle with external clearing house (async external gateway call + cronjob to sync DB)

References​

• How Exchange Happen? Simulating a financial exchange in Scala
• Open Sources
  • GitHub - objectcomputing/liquibook: Modern C++ order matching engine
  • GitHub - cyanly/gotrade: A proof of concept of an electronic trading system written in Golang
• The Financial Information eXchange ("FIX") Protocol
• Types of orders: Technical Analysis Course. Training,Coaching & Mentoring for Traders / Investors - Types of orders used when buying or selling a stock
• GitHub - fmstephe/matching_engine: A simple financial trading matching engine. Built to learn more about how they work.
• Automated Algorithmic Trading: Learning Agents for Limit Order Book Trading