A trading system collects price updates and sends orders on your behalf. In order to get to that, you need to code all the steps that you would do if you were trading without any trading system. If you would like to make money by buying low and selling high, you will need to choose the product you will use to trade. Once you select this product, you want to receive the order from the other traders. The other traders will provide you their intention (their orders) to trade a financial asset by indicating the side, the price and the quantity. As soon as you receive enough orders for the product that you want to trade, you can choose the trader you are going to make a deal with. You will make your decision based on the price of this asset. If you want to resell this asset later one, it will be important to buy it for a low price.  When you agree with a price, you will indicate the other trader that you will want to buy for the advertised price. When the deal is done, you now own this product. You will proceed the same way when you want to sell it at a higher price. We formalize this way of trading using functional units:

• Data handling: Collecting price updates coming from the venues you will choose to trade with (exchanges, ECNs, dark pools). This component (called a gateway in the following diagram) is one of the most critical of the trading system. The task of this component is to get the book for a given instrument from an exchange to the trading system. This component will be linked to the network and it will get connected to exchanges receiving and sending streams to communicate with it. 

The following diagram represents the location of the gateways in the trading system. They are the input and the output of the trading system:

The diagram shows the following:

• The venues represent traders, exchanges, ecns, and dark pools.
• The getaways and venues can be linked by different ways (they are represented using arrows).
• We can use a wire, wireless network, internet, microwave, or fibers. All these different network media have different characteristics in terms of speed, data loss, and bandwidth.
• We can observe the arrows are bidirectional for the price updates and the orders. There is a protocol to ask for price updates.
• The gateway will initiate a network connection with the venue, authenticate itself, and subscribe to a given instrument to start receiving price updates (we will explain this part in more detail later).
• The gateway taking care of orders also receives and send messages. When an order is created, it is sent through the network to the venue.
• If the venue receives this order, an acknowledgment of this order will be sent. When this order has met a matching order, a trade will be sent to the trading system.