What Is FPGA?

Many people today have heard the terms ‘high-frequency trading’ and ‘low latency’, but not many truly understand what FPGA technology is, or how it’s transforming the landscape of ultra-low latency (ULL) trading.

In today’s competitive trading environment, where every nanosecond counts, firms are constantly looking for ways to execute orders faster than their competitors. One of the most significant advancements in this space is the use of Field-Programmable Gate Arrays (FPGAs), a hardware-based solution that dramatically reduces latency and enhances execution efficiency.

Our partners at Magmio have shared a deep dive into how FPGAs are reshaping trading on the NSE, exploring why software alone is no longer enough, and how the fastest firms are leveraging hardware acceleration to maintain an edge.

From preloading orders, to reacting to market data faster, to ultra-fast hedging, this article covers key concepts every trader aiming to compete in ULL markets should understand.

⬇️ Read on to learn how FPGA-based trading is revolutionizing execution speed and strategy design in modern markets.

FPGAs on NSE – What Are the Fastest Companies Doing?

What is an FPGA?

An FPGA is an integrated circuit made up of programmable logic blocks and reconfigurable interconnects, allowing for customization after manufacturing. This adaptability enables FPGAs to perform highly specialized tasks with maximum efficiency, making them ideal for ultra-low latency applications like high-frequency trading and market data processing. Their ability to handle massive parallel computations, combined with power efficiency, sets them apart from general-purpose processors.

Why FPGA Beats Software

Even highly optimized software struggles to match the raw speed of FPGA-based systems. Here’s why:

1. Network Proximity: FPGAs can be connected directly to the network, enabling them to react to data updates before the CPU even receives the packet.
2. Order Preloading: Orders and associated processing can be preloaded, drastically reducing execution latency.

Preloading Orders: A Critical Edge

A major bottleneck in NSE’s NNF protocol is the MD5 checksum computation, which takes around 400 nanoseconds per order.

The solution? Precompute MD5 checksums in software and preload multiple potential orders into the FPGA. This allows instant order submission and avoids latency spikes. However, it requires the ability to anticipate price movements and maintain order validity.

Reacting to Market Data (MTBT) Faster

Most strategies respond to changes in the order book—but this can be too slow. A more efficient approach is reacting directly to MTBT (Market Trade and Book Transactions) messages.

💡 Example Strategy:

• Set triggers for New Order, Order Modification, or Trade messages.
• If a Sell order appears at a better price than X, send a Buy order at price Y.
• When combined with preloaded orders, this enables near-instantaneous execution.

Use Case: Ultra-Fast Hedging

Hedging fills quickly is a core challenge in HFT. Here’s how FPGAs make it faster:

• A software strategy places an order and receives an Order Confirmation with a unique ID.
• A corresponding hedge order (with MD5 checksum) is preloaded into the FPGA.
• A trigger detects the Trade message for the original order.
• The hedge is sent within 150 nanoseconds of receiving the trade message.

This approach ensures nearly instantaneous hedging and minimizes market exposure.

FPGA vs. Software: The Competitive Question

Not all strategies can be fully preloaded—some still rely on real-time market data and order book analysis. But even in these cases, FPGA outperforms software:

• FPGA wire-to-wire latency (with order book updates): under 1 microsecond
• Best software implementations: exceed 2 microseconds, often much more

The key question: Are you competing with software, or with hardware that uses triggers and preloaded orders?

The Magmio FPGA Solution

At Magmio, we’ve built a robust tick-to-trade FPGA framework tailored for ULL traders:

✅ Sub-300 ns wire-to-wire latency (including order book processing)
✅ Trigger-based strategies executing in under 150 ns
✅ Full exchange protocol handling—focus only on trading logic
✅ Accessible to software developers (no HDL expertise required)
✅ Go live in months, not years

Learn more about Magmio here.

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