Problem Statement

📖 3 min read 📄 Part 1 of 10

Stock Trading Platform - Problem Statement

Overview

Design a high-frequency trading platform that processes millions of trades per second with microsecond latency, ensures regulatory compliance, handles market data distribution, and maintains ACID guarantees for financial transactions.

Functional Requirements

Core Trading Features

  • Order Placement: Market, limit, stop-loss, stop-limit orders
  • Order Matching: Match buy/sell orders in real-time
  • Order Book: Maintain real-time order book per symbol
  • Trade Execution: Execute trades with sub-millisecond latency
  • Order Cancellation: Cancel pending orders instantly
  • Order Modification: Modify price/quantity of pending orders

Market Data

  • Real-time Quotes: Bid/ask prices with microsecond updates
  • Trade Feed: Real-time trade execution data
  • Order Book Depth: Level 2 market data (top 10 bids/asks)
  • Historical Data: OHLCV (Open, High, Low, Close, Volume) data
  • Market Statistics: Volume, volatility, moving averages

Account Management

  • Portfolio: Real-time portfolio value and positions
  • Balance: Cash balance and buying power
  • Margin: Margin requirements and maintenance
  • Risk Management: Position limits, loss limits
  • Transaction History: Complete audit trail

Regulatory Compliance

  • Audit Trail: Immutable record of all transactions
  • Reporting: Daily/monthly regulatory reports
  • KYC/AML: Know Your Customer, Anti-Money Laundering
  • Circuit Breakers: Halt trading during extreme volatility
  • Fair Access: No preferential treatment

Non-Functional Requirements

Performance

  • Order Latency: <1ms for order placement to execution
  • Market Data Latency: <100 microseconds for quote updates
  • Throughput: 1 million orders per second
  • Trade Execution: <500 microseconds
  • Order Book Updates: <50 microseconds

Reliability

  • Uptime: 99.999% during trading hours (5 minutes/year)
  • Data Durability: Zero data loss for transactions
  • Disaster Recovery: <1 second RTO, zero RPO
  • Failover: Automatic failover in <100ms

Scale

  • Concurrent Users: 1 million active traders
  • Symbols: 10,000 tradable symbols
  • Daily Orders: 100 million orders per day
  • Daily Trades: 50 million trades per day
  • Market Data: 10 billion ticks per day

Compliance

  • ACID Transactions: Guaranteed consistency
  • Audit Trail: Immutable, tamper-proof logs
  • Regulatory Reporting: SEC, FINRA compliance
  • Fair Ordering: FIFO order matching
  • No Front-Running: Prevent insider trading

Key Challenges

1. Ultra-Low Latency

  • Microsecond-level response times
  • Minimize network hops
  • Optimize every layer (hardware, OS, application)
  • Co-location with exchanges

2. High Throughput

  • 1 million orders per second
  • 10 billion market data ticks per day
  • Parallel processing
  • Lock-free data structures

3. Consistency and Correctness

  • ACID guarantees for trades
  • No double-spending
  • Accurate portfolio calculations
  • Prevent race conditions

4. Regulatory Compliance

  • Complete audit trail
  • Fair order matching
  • Circuit breakers
  • Reporting requirements

Success Metrics

Performance Metrics

  • Order Latency: p99 <1ms
  • Market Data Latency: p99 <100μs
  • Throughput: 1M orders/second sustained
  • Uptime: 99.999% during trading hours

Business Metrics

  • Trading Volume: $10B daily
  • Active Users: 1M concurrent traders
  • Market Share: Top 3 platform
  • Revenue: $100M annual (commissions)

Compliance Metrics

  • Audit Coverage: 100% of transactions
  • Reporting Accuracy: 100%
  • Regulatory Violations: Zero
  • Failed Trades: <0.001%

This problem requires handling extreme performance requirements, maintaining financial accuracy, and ensuring regulatory compliance - making it one of the most demanding system design challenges.