We are going to have an overview of the technology behind the trading systems, the backend systems and the front end systems. We are going to have a broad overview of what is behind these platforms and what make them function. On many modern trading systems there's different designs the different methods of accomplishing the same tasks. It is not sort of a black and white this is how it's done, as we know there are many roads that can take you to the same destination, and this is absolutely true when it comes to trading system design.
Typically, in the backend servers there will be Unix or Linux and the front end will be windows so the Traders are running Windows machines typically, and in the front-end there will be a Windows applications that the Traders are using. These applications are connecting to backend servers that are running Unix or Linux for many reasons that we'll discuss in the future.
Let's begin with the front-end so the front-end trading application or OMS(order management system) or EMS (execution management system) so think of the front end system as the cockpit of a plane Traders are using this interface called an OMS/EMS to view market data, place orders, and manage trades.
And in the backend there are lots of other things. So one component you might see is a FIX engine (financial information exchange) is sort of like an air traffic controller for trading it ensures that all messages orders, confirmations, cancellations, that are between the trader and the market are sent and received accurately and quickly.
Now one server that might be is a position server(PS) so the position server is the accountant of the trading platform it keeps track of all the trades and positions. For example, how much of each asset the trader holds.
Next we have a database, now there's many different types of databases that are used but generally think of the database as the library of the trading platform it stores all the historical data, including past trades, market data data, and user preferences.
We also have the market data server which is like the news ticker that you see on CNBC where it's continuously receiving realtime data from various markets and distributes this information to the trading application.
Next we have is compliance engine or compliant server is rule enforcer, it checks that all trades comply with the regulatory requirements and internal policies.
We also have middleware so middleware is the glue that holds everything together it's the software that connects different parts of the trading platform allowing them to communicate and work together smoothly so we also have logging uh so we have application logs and fix logs. We'll get into that a little bit more in the future so with the application logs these are like the sort of a ship's log book where they record every action taken by the trading application such as user logins trades placed and system errors. So trader says he sent an order to a certain destination, did they really. Trader says they used a certain algorithm and and set a certain parameter did they really. Application logs will tell you the answer to that question very very powerful thing to have for troubleshooting and support purposes.
Now next is fix logs so these are the logs that are tracking all of the FIX messages so they are essential for understanding the communication between the trading application and the market.
So now let's bring everything all together so imagine you're on a trading platform ready to make a trade so you have the front end application you see an opportunity on your trading application your EMS via Market data that's being broadcast or streamed to the front end application so this app shows real-time prices from the market data server now you have the fix engine you place an order and the fix engine sends the order to the market now obviously the front end application is going to do the initial composition of the initial fix message but it's then going to pass it to the fix engine which is then going to pass it to the Final Destination.
We also have a position server, which updates your portfolio once a trade is executed or filled. It tracks changes in your position and ensures your records are accurate. So, if you ever claim you didn’t buy something, the position server holds the definitive record and knows the truth. It's an essential tool for keeping your portfolio and trading history up to date.
Beyond that, the database stores trade details for future reference. If any trading issues arise, support staff can query the database to view all fills and see where the orders were executed. The data can be organized in various ways, such as sorting by destination or other criteria. It’s a highly versatile tool for conducting in-depth investigations into trading activity. From a business perspective, the database is invaluable for analyzing metrics like the number of orders sent to specific destinations or other trading details. This information can easily be retrieved from the database and shared with the business teams