Infrastructure expenses in StatArb

The last big consideration in StatArb trading is the fact that to be successful in StatArb trading strategies as a business, it is very important to be connected to a lot of electronic trading exchanges to get market data across different exchanges across different countries/continents/markets. Being co-located in so many trading exchanges is extremely expensive from an infrastructure cost perspective. The other problem is that one needs to not only be connected to as many exchanges as possible, but a lot of software development investment needs to make to receive, decode, and store market data and also to send orders, since a lot of these exchanges likely use different market data feed and order gateway communication formats.

The final big consideration is that since StatArb strategies need to receive market data from all exchanges, now every venue needs a physical data link from every other venue, which gets exponentially expensive for every exchange added. Then, if one considers using the much more expensive microwave services to deliver data faster to the trading boxes, that makes it even worse. So to summarize, StatArb trading strategies can be significantly more expensive than some of the other trading strategies from an infrastructure perspective when it comes to running an algorithmic trading business.

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