Now we approach the final section on best practices and the approaches to keeping up with competitive market participants and changing market conditions. As we've discussed, algorithmic/quantitative trading is largely a technology business and advances made in technology over the years have a large impact on the algorithmic trading business. Advances in technology is what allowed modern electronic trading in the first place, starting from outcry pits to mostly-automated and technology-assisted trading. Advances leading to faster trading servers, specialized network switches capable of higher throughput and lower switching latencies, advances made in network card technology and kernel bypass mechanisms, and even FPGA technology are important examples of this. This has caused the electronic trading business to evolve into a high-frequency, round-the-clock trading business where it is mostly automated trading bots trading against other automated trading bots.

Not only have there been hardware enhancements, but even software development practices have evolved over time. Now, large teams of talented software engineers have figured out how to build scalable and extremely low latency trading systems and trading strategies. This has been assisted by a combination of the evolution of both low-level and high-level programming languages, such as C, C++, and Java, along with improvements in compilers that can produce highly-optimized code; both have significantly improved the scalability and speed of what trading systems and trading strategies can be deployed to live trading markets.

A lot of market participants also now have access to microwave networks that can transmit data between locations much faster than physical fiber connections can, leading to latency-arbitrage opportunities. Time and time again, participants who have maintained their technological edge and kept up with the technological advancements made by their competition have been the ones to survive. Large algorithmic/HFT trading firms with superior technologies have even cornered the market on some trades and made it impossible for others to compete with them.

To summarize the main point of this section, algorithmic trading firms must continuously evolve their use of technology for their trading business to stay competitive. If other market participants gain access to breakthrough technologies, market participants who do not adapt will get wiped out.