How Can API Limitations Affect the Performance of HFT Bots?
Exchange APIs often impose rate limits, restricting the number of requests (e.g. price quotes, order submissions) an HFT bot can make per second. These limits can prevent the bot from getting the latest price data or executing trades fast enough to capture an arbitrage opportunity.
HFT bots must be designed to manage these limits efficiently, prioritizing critical requests and using high-throughput connections where available.
Glossar
HFT Bots
Bot ⎊ Automated trading systems, frequently employed within cryptocurrency exchanges and derivatives markets, leverage high-speed data feeds and complex algorithms to execute orders at rates unattainable by human traders.
API
Interface ⎊ Within cryptocurrency derivatives and financial engineering, an Application Programming Interface (API) serves as a crucial intermediary, facilitating programmatic access to market data, order execution functionalities, and risk management tools.
Exchange API
Access ⎊ Exchange API refers to the programmatic interface provided by centralized cryptocurrency exchanges allowing automated trading systems to interact with order books, manage accounts, and execute trades.
HFT
Velocity ⎊ This strategy relies on ultra-low latency infrastructure to execute a massive volume of orders in fractions of a second, capitalizing on minute price discrepancies.
Performance
Evaluation ⎊ Performance, within cryptocurrency, options, and derivatives, represents a quantified assessment of strategy efficacy, typically measured by metrics like Sharpe ratio, Sortino ratio, or maximum drawdown, adjusted for risk-adjusted returns over a defined period.
Api Limitations
Constraint ⎊ API limitations within cryptocurrency derivatives trading, options, and broader financial derivatives stem from a confluence of factors, including exchange infrastructure, regulatory frameworks, and the inherent complexities of these instruments.