@mytechtoday/augment-extensions 1.2.0 → 1.2.2

package/augment-extensions/domain-rules/software-architecture/examples/trading-eventdriven.md

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+# Stock Trading System Architecture Example
+
+## Overview
+
+This document provides a comprehensive example of a stock trading system built with event-driven architecture, focusing on low latency, high throughput, and real-time processing.
+
+---
+
+## System Context
+
+### Business Requirements
+
+**Functional Requirements**
+- Real-time market data streaming
+- Order placement and execution
+- Portfolio management and tracking
+- Risk management and compliance
+- Trade settlement and clearing
+- Market analysis and alerts
+- Audit trail and regulatory reporting
+
+**Non-Functional Requirements**
+- **Latency**: < 10ms order processing
+- **Throughput**: 100,000+ orders/second
+- **Availability**: 99.99% during trading hours
+- **Data Integrity**: Zero data loss, exactly-once processing
+- **Compliance**: SEC, FINRA regulations
+- **Audit**: Complete trade history
+
+### System Constraints
+
+- Trading hours: 9:30 AM - 4:00 PM EST
+- Market data updates: 1000+ updates/second per symbol
+- Order types: Market, Limit, Stop, Stop-Limit
+- Asset classes: Stocks, Options, Futures
+- Regulatory reporting: T+1 settlement
+
+---
+
+## Architecture Overview
+
+### High-Level Architecture
+
+```
+┌─────────────────────────────────────────────────────────────┐
+│                     Trading Platform                         │
+├─────────────────────────────────────────────────────────────┤
+│                                                               │
+│  Market Data Feed → Event Stream → Trading Engine            │
+│         ↓                              ↓                      │
+│  Price Updates      Order Events → Execution Engine          │
+│         ↓                              ↓                      │
+│  Analytics          Risk Check → Portfolio Service           │
+│         ↓                              ↓                      │
+│  Alerts             Settlement → Clearing Service            │
+│                                        ↓                      │
+│                     Audit Log → Compliance Service           │
+│                                                               │
+└─────────────────────────────────────────────────────────────┘
+```
+
+### Event Flow
+
+```
+1. Market Data Events
+   MarketDataReceived → PriceUpdated → AnalyticsCalculated → AlertTriggered
+
+2. Order Lifecycle Events
+   OrderPlaced → OrderValidated → RiskChecked → OrderExecuted → TradeSettled
+
+3. Portfolio Events
+   TradeExecuted → PositionUpdated → PortfolioRebalanced → ReportGenerated
+```
+
+---
+
+## Service Architecture
+
+### Core Services
+
+**1. Market Data Service**
+- Ingest real-time market data from exchanges
+- Normalize data from multiple sources
+- Publish price updates to event stream
+- Handle 1M+ events/second
+
+**2. Order Management Service**
+- Receive and validate orders
+- Publish order events
+- Track order lifecycle
+- Handle order modifications and cancellations
+
+**3. Trading Engine**
+- Match orders with market conditions
+- Execute trades
+- Publish execution events
+- Sub-millisecond latency
+
+**4. Risk Management Service**
+- Real-time risk calculations
+- Position limits enforcement
+- Margin requirements
+- Circuit breaker triggers
+
+**5. Portfolio Service**
+- Track positions and P&L
+- Calculate portfolio metrics
+- Handle corporate actions
+- Generate performance reports
+
+**6. Settlement Service**
+- Trade confirmation
+- Clearing and settlement (T+1)
+- Cash management
+- Reconciliation
+
+**7. Compliance Service**
+- Regulatory reporting
+- Audit trail
+- Trade surveillance
+- Best execution analysis
+
+---
+
+## Technology Stack
+
+### Event Streaming
+- **Message Broker**: Apache Kafka (high throughput, low latency)
+- **Stream Processing**: Apache Flink (real-time analytics)
+- **Event Store**: Apache Kafka + Kafka Streams
+- **Schema Registry**: Confluent Schema Registry (Avro)
+
+### Data Storage
+- **Time-Series DB**: InfluxDB (market data, metrics)
+- **Relational DB**: PostgreSQL (orders, accounts, positions)
+- **In-Memory Cache**: Redis (real-time prices, session data)
+- **Event Store**: Kafka (event sourcing)
+- **Analytics**: ClickHouse (OLAP queries)
+
+### Services
+- **Language**: Java (low latency), Go (high concurrency)
+- **Framework**: Spring Boot, Micronaut
+- **API**: gRPC (internal), REST (external)
+
+### Infrastructure
+- **Container Orchestration**: Kubernetes
+- **Service Mesh**: Istio
+- **Monitoring**: Prometheus + Grafana
+- **Tracing**: Jaeger
+- **Logging**: ELK Stack
+
+---
+
+## Implementation Details
+
+### 1. Event Schema Design
+
+**Market Data Event**
+
+```java
+// Avro schema for market data events
+public class MarketDataEvent {
+    private String symbol;
+    private String exchange;
+    private BigDecimal bidPrice;
+    private BigDecimal askPrice;
+    private long bidSize;
+    private long askSize;
+    private BigDecimal lastPrice;
+    private long volume;
+    private long timestamp; // Nanosecond precision
+    private String eventId;
+}
+
+// Avro schema for order events
+public class OrderEvent {
+    private String orderId;
+    private String accountId;
+    private String symbol;
+    private OrderType orderType; // MARKET, LIMIT, STOP, STOP_LIMIT
+    private OrderSide side; // BUY, SELL
+    private long quantity;
+    private BigDecimal price;
+    private BigDecimal stopPrice;
+    private OrderStatus status; // PENDING, VALIDATED, EXECUTED, REJECTED, CANCELLED
+    private long timestamp;
+    private String eventId;
+}
+
+// Trade execution event
+public class TradeExecutedEvent {
+    private String tradeId;
+    private String orderId;
+    private String symbol;
+    private OrderSide side;
+    private long quantity;
+    private BigDecimal executionPrice;
+    private BigDecimal commission;
+    private long executionTime;
+    private String venue;
+    private String eventId;
+}
+```
+
+### 2. Market Data Service Implementation
+
+**Real-Time Price Streaming**
+
+```java
+// Market data ingestion service
+@Service
+public class MarketDataService {
+    private final KafkaTemplate<String, MarketDataEvent> kafkaTemplate;
+    private final RedisTemplate<String, String> redisTemplate;
+
+    @Autowired
+    public MarketDataService(
+        KafkaTemplate<String, MarketDataEvent> kafkaTemplate,
+        RedisTemplate<String, String> redisTemplate
+    ) {
+        this.kafkaTemplate = kafkaTemplate;
+        this.redisTemplate = redisTemplate;
+    }
+
+    // Ingest market data from exchange feed
+    public void processMarketData(ExchangeFeed feed) {
+        MarketDataEvent event = MarketDataEvent.builder()
+            .symbol(feed.getSymbol())
+            .exchange(feed.getExchange())
+            .bidPrice(feed.getBidPrice())
+            .askPrice(feed.getAskPrice())
+            .bidSize(feed.getBidSize())
+            .askSize(feed.getAskSize())
+            .lastPrice(feed.getLastPrice())
+            .volume(feed.getVolume())
+            .timestamp(System.nanoTime())
+            .eventId(UUID.randomUUID().toString())
+            .build();
+
+        // Publish to Kafka topic (partitioned by symbol)
+        kafkaTemplate.send("market-data", event.getSymbol(), event);
+
+        // Update Redis cache for real-time queries
+        String key = "price:" + event.getSymbol();
+        redisTemplate.opsForValue().set(key,
+            objectMapper.writeValueAsString(event),
+            Duration.ofSeconds(60)
+        );
+    }
+}
+
+// Kafka consumer for market data analytics
+@Component
+public class MarketDataAnalytics {
+
+    @KafkaListener(topics = "market-data", groupId = "analytics-group")
+    public void processMarketData(MarketDataEvent event) {
+        // Calculate technical indicators
+        calculateMovingAverage(event);
+        calculateRSI(event);
+        detectPriceAlerts(event);
+    }
+
+    private void calculateMovingAverage(MarketDataEvent event) {
+        // Use Kafka Streams for windowed aggregations
+        // Calculate SMA, EMA over 5min, 15min, 1hr windows
+    }
+
+    private void detectPriceAlerts(MarketDataEvent event) {
+        // Check if price crosses user-defined thresholds
+        // Publish alert events
+    }
+}
+```
+
+### 3. Order Management with Event Sourcing
+
+**Order Service**
+
+```java
+@Service
+public class OrderService {
+    private final OrderRepository orderRepository;
+    private final EventPublisher eventPublisher;
+    private final RiskService riskService;
+
+    @Transactional
+    public Order placeOrder(PlaceOrderRequest request) {
+        // Create order entity
+        Order order = Order.builder()
+            .orderId(UUID.randomUUID().toString())
+            .accountId(request.getAccountId())
+            .symbol(request.getSymbol())
+            .orderType(request.getOrderType())
+            .side(request.getSide())
+            .quantity(request.getQuantity())
+            .price(request.getPrice())
+            .status(OrderStatus.PENDING)
+            .createdAt(Instant.now())
+            .build();
+
+        // Persist order
+        orderRepository.save(order);
+
+        // Publish OrderPlaced event
+        OrderEvent event = OrderEvent.fromOrder(order);
+        eventPublisher.publish("order-events", event);
+
+        return order;
+    }
+}
+
+// Event-driven order processing pipeline
+@Component
+public class OrderProcessor {
+
+    @KafkaListener(topics = "order-events", groupId = "order-processor")
+    public void processOrderEvent(OrderEvent event) {
+        switch (event.getStatus()) {
+            case PENDING:
+                validateOrder(event);
+                break;
+            case VALIDATED:
+                checkRisk(event);
+                break;
+            case RISK_APPROVED:
+                executeOrder(event);
+                break;
+            case EXECUTED:
+                settleOrder(event);
+                break;
+        }
+    }
+
+    private void validateOrder(OrderEvent event) {
+        // Validate order parameters
+        // Check account exists and is active
+        // Verify symbol is tradable
+
+        if (isValid(event)) {
+            event.setStatus(OrderStatus.VALIDATED);
+            eventPublisher.publish("order-events", event);
+        } else {
+            event.setStatus(OrderStatus.REJECTED);
+            event.setRejectionReason("Invalid order parameters");
+            eventPublisher.publish("order-events", event);
+        }
+    }
+
+    private void checkRisk(OrderEvent event) {
+        // Check buying power
+        // Verify position limits
+        // Check concentration risk
+
+        RiskCheckResult result = riskService.checkOrder(event);
+
+        if (result.isApproved()) {
+            event.setStatus(OrderStatus.RISK_APPROVED);
+            eventPublisher.publish("order-events", event);
+        } else {
+            event.setStatus(OrderStatus.REJECTED);
+            event.setRejectionReason(result.getReason());
+            eventPublisher.publish("order-events", event);
+        }
+    }
+}
+```
+
+### 4. Trading Engine with Low Latency
+
+**High-Performance Order Execution**
+
+```java
+// Trading engine using Disruptor for ultra-low latency
+public class TradingEngine {
+    private final Disruptor<OrderCommand> disruptor;
+    private final RingBuffer<OrderCommand> ringBuffer;
+
+    public TradingEngine() {
+        // Disruptor pattern for lock-free concurrency
+        ThreadFactory threadFactory = new ThreadFactory() {
+            @Override
+            public Thread newThread(Runnable r) {
+                Thread t = new Thread(r);
+                t.setPriority(Thread.MAX_PRIORITY);
+                return t;
+            }
+        };
+
+        disruptor = new Disruptor<>(
+            OrderCommand::new,
+            1024 * 1024, // Ring buffer size (power of 2)
+            threadFactory,
+            ProducerType.MULTI,
+            new YieldingWaitStrategy() // Low latency wait strategy
+        );
+
+        disruptor.handleEventsWith(new OrderExecutionHandler());
+        disruptor.start();
+
+        ringBuffer = disruptor.getRingBuffer();
+    }
+
+    public void submitOrder(OrderEvent order) {
+        long sequence = ringBuffer.next();
+        try {
+            OrderCommand command = ringBuffer.get(sequence);
+            command.setOrder(order);
+        } finally {
+            ringBuffer.publish(sequence);
+        }
+    }
+
+    // Event handler for order execution
+    private class OrderExecutionHandler implements EventHandler<OrderCommand> {
+        @Override
+        public void onEvent(OrderCommand command, long sequence, boolean endOfBatch) {
+            OrderEvent order = command.getOrder();
+
+            // Execute order matching logic
+            TradeExecutedEvent trade = executeOrder(order);
+
+            // Publish trade execution event
+            if (trade != null) {
+                eventPublisher.publish("trade-events", trade);
+            }
+        }
+
+        private TradeExecutedEvent executeOrder(OrderEvent order) {
+            // Match order with market data
+            // For market orders: execute at current market price
+            // For limit orders: check if price is met
+
+            MarketDataEvent marketData = getLatestMarketData(order.getSymbol());
+
+            BigDecimal executionPrice = calculateExecutionPrice(order, marketData);
+
+            return TradeExecutedEvent.builder()
+                .tradeId(UUID.randomUUID().toString())
+                .orderId(order.getOrderId())
+                .symbol(order.getSymbol())
+                .side(order.getSide())
+                .quantity(order.getQuantity())
+                .executionPrice(executionPrice)
+                .commission(calculateCommission(order))
+                .executionTime(System.nanoTime())
+                .venue("NASDAQ")
+                .eventId(UUID.randomUUID().toString())
+                .build();
+        }
+    }
+}
+
+```
+
+### 5. Portfolio Service with Event Sourcing
+
+**Position Tracking**
+
+```java
+@Service
+public class PortfolioService {
+    private final PositionRepository positionRepository;
+
+    @KafkaListener(topics = "trade-events", groupId = "portfolio-group")
+    public void handleTradeExecuted(TradeExecutedEvent event) {
+        // Update position using event sourcing
+        Position position = positionRepository.findByAccountAndSymbol(
+            event.getAccountId(),
+            event.getSymbol()
+        ).orElse(new Position(event.getAccountId(), event.getSymbol()));
+
+        // Apply trade to position
+        if (event.getSide() == OrderSide.BUY) {
+            position.addShares(event.getQuantity(), event.getExecutionPrice());
+        } else {
+            position.removeShares(event.getQuantity(), event.getExecutionPrice());
+        }
+
+        // Calculate realized P&L
+        BigDecimal realizedPnL = position.calculateRealizedPnL(event);
+
+        // Persist updated position
+        positionRepository.save(position);
+
+        // Publish position updated event
+        PositionUpdatedEvent positionEvent = PositionUpdatedEvent.builder()
+            .accountId(event.getAccountId())
+            .symbol(event.getSymbol())
+            .quantity(position.getQuantity())
+            .averagePrice(position.getAveragePrice())
+            .marketValue(position.getMarketValue())
+            .unrealizedPnL(position.getUnrealizedPnL())
+            .realizedPnL(realizedPnL)
+            .timestamp(Instant.now())
+            .build();
+
+        eventPublisher.publish("position-events", positionEvent);
+    }
+}
+```
+
+---
+
+## Event Streaming Configuration
+
+### Kafka Topic Configuration
+
+```yaml
+# Kafka topics for trading system
+topics:
+  market-data:
+    partitions: 100  # Partition by symbol for parallelism
+    replication-factor: 3
+    retention-ms: 86400000  # 24 hours
+    compression-type: lz4
+
+  order-events:
+    partitions: 50
+    replication-factor: 3
+    retention-ms: 2592000000  # 30 days (audit trail)
+    compression-type: snappy
+
+  trade-events:
+    partitions: 50
+    replication-factor: 3
+    retention-ms: 31536000000  # 1 year (regulatory)
+    compression-type: snappy
+
+  position-events:
+    partitions: 20
+    replication-factor: 3
+    retention-ms: 31536000000  # 1 year
+
+  risk-events:
+    partitions: 10
+    replication-factor: 3
+    retention-ms: 2592000000  # 30 days
+```
+
+### Kafka Producer Configuration
+
+```java
+@Configuration
+public class KafkaProducerConfig {
+
+    @Bean
+    public ProducerFactory<String, Object> producerFactory() {
+        Map<String, Object> config = new HashMap<>();
+
+        // Broker configuration
+        config.put(ProducerConfig.BOOTSTRAP_SERVERS_CONFIG, "kafka:9092");
+
+        // Serialization
+        config.put(ProducerConfig.KEY_SERIALIZER_CLASS_CONFIG, StringSerializer.class);
+        config.put(ProducerConfig.VALUE_SERIALIZER_CLASS_CONFIG, KafkaAvroSerializer.class);
+        config.put("schema.registry.url", "http://schema-registry:8081");
+
+        // Performance tuning for low latency
+        config.put(ProducerConfig.ACKS_CONFIG, "1"); // Leader acknowledgment only
+        config.put(ProducerConfig.LINGER_MS_CONFIG, 0); // No batching delay
+        config.put(ProducerConfig.BATCH_SIZE_CONFIG, 16384);
+        config.put(ProducerConfig.BUFFER_MEMORY_CONFIG, 33554432); // 32MB
+        config.put(ProducerConfig.COMPRESSION_TYPE_CONFIG, "lz4");
+
+        // Idempotence for exactly-once semantics
+        config.put(ProducerConfig.ENABLE_IDEMPOTENCE_CONFIG, true);
+        config.put(ProducerConfig.MAX_IN_FLIGHT_REQUESTS_PER_CONNECTION, 5);
+
+        return new DefaultKafkaProducerFactory<>(config);
+    }
+}
+```
+
+---
+
+## Monitoring and Observability
+
+### Key Metrics
+
+**Latency Metrics**
+```java
+@Component
+public class TradingMetrics {
+    private final MeterRegistry meterRegistry;
+
+    public void recordOrderLatency(long startTime) {
+        long latency = System.nanoTime() - startTime;
+        meterRegistry.timer("order.processing.latency")
+            .record(latency, TimeUnit.NANOSECONDS);
+    }
+
+    public void recordExecutionLatency(long startTime) {
+        long latency = System.nanoTime() - startTime;
+        meterRegistry.timer("order.execution.latency")
+            .record(latency, TimeUnit.NANOSECONDS);
+    }
+}
+```
+
+**Prometheus Metrics**
+- `order_processing_latency_seconds` - P50, P95, P99 latency
+- `order_throughput_total` - Orders processed per second
+- `trade_execution_latency_seconds` - Execution latency
+- `market_data_lag_seconds` - Market data freshness
+- `kafka_consumer_lag` - Event processing lag
+- `risk_check_duration_seconds` - Risk check performance
+
+---
+
+## Scalability and Performance
+
+### Performance Optimizations
+
+**1. Partitioning Strategy**
+- Partition market data by symbol (100 partitions)
+- Partition orders by account ID (50 partitions)
+- Enables parallel processing
+
+**2. In-Memory Caching**
+```java
+// Redis cache for hot market data
+@Cacheable(value = "market-data", key = "#symbol")
+public MarketDataEvent getLatestPrice(String symbol) {
+    return marketDataRepository.findLatestBySymbol(symbol);
+}
+```
+
+**3. Database Optimization**
+- Use time-series database (InfluxDB) for market data
+- Partition PostgreSQL tables by date
+- Read replicas for reporting queries
+- Connection pooling (HikariCP)
+
+**4. Network Optimization**
+- Co-locate services in same availability zone
+- Use gRPC for inter-service communication
+- Enable TCP_NODELAY for low latency
+
+### Scalability Metrics
+
+**Before Optimization**
+- Order processing latency: 50ms (P99)
+- Throughput: 10,000 orders/second
+- Market data lag: 500ms
+
+**After Optimization**
+- Order processing latency: 8ms (P99)
+- Throughput: 100,000 orders/second
+- Market data lag: 50ms
+
+---
+
+## Compliance and Audit
+
+### Regulatory Requirements
+
+**SEC Rule 606 - Order Routing**
+- Track order routing decisions
+- Report execution quality
+- Store for 3 years
+
+**FINRA Rule 4511 - Books and Records**
+- Maintain complete audit trail
+- Immutable event log (Kafka)
+- Retention: 6 years
+
+**Implementation**
+
+```java
+@Service
+public class AuditService {
+
+    @KafkaListener(topics = {"order-events", "trade-events"}, groupId = "audit-group")
+    public void auditEvent(Object event) {
+        // Store all events in immutable audit log
+        AuditRecord record = AuditRecord.builder()
+            .eventType(event.getClass().getSimpleName())
+            .eventData(objectMapper.writeValueAsString(event))
+            .timestamp(Instant.now())
+            .userId(SecurityContextHolder.getContext().getAuthentication().getName())
+            .build();
+
+        auditRepository.save(record);
+    }
+
+    // Generate regulatory reports
+    public Report generateRule606Report(LocalDate startDate, LocalDate endDate) {
+        // Query audit log for order routing data
+        // Aggregate execution quality metrics
+        // Generate report in required format
+    }
+}
+```
+
+---
+
+## Key Takeaways
+
+### Architecture Decisions
+
+1. **Event-Driven Architecture**: Enables loose coupling, scalability, and real-time processing
+2. **Kafka for Event Streaming**: High throughput, low latency, durable event log
+3. **Event Sourcing**: Complete audit trail, regulatory compliance
+4. **LMAX Disruptor**: Ultra-low latency order execution (< 10ms)
+5. **Redis Caching**: Fast access to real-time market data
+6. **Time-Series Database**: Efficient storage and querying of market data
+
+### Trade-offs
+
+**Benefits**
+- ✅ Low latency (< 10ms order processing)
+- ✅ High throughput (100K+ orders/second)
+- ✅ Complete audit trail (regulatory compliance)
+- ✅ Scalable (horizontal scaling of consumers)
+- ✅ Fault tolerant (Kafka replication)
+- ✅ Real-time analytics (Kafka Streams)
+
+**Challenges**
+- ❌ Eventual consistency (not suitable for all use cases)
+- ❌ Complex debugging (distributed event flows)
+- ❌ Event schema evolution (requires careful planning)
+- ❌ Operational complexity (Kafka cluster management)
+- ❌ Higher infrastructure costs
+
+### Lessons Learned
+
+1. **Partition by symbol**: Enables parallel processing of market data
+2. **Use Avro schemas**: Ensures backward compatibility
+3. **Monitor consumer lag**: Critical for detecting processing delays
+4. **Implement circuit breakers**: Prevents cascade failures
+5. **Use exactly-once semantics**: Ensures data integrity
+6. **Optimize for P99 latency**: Not just average latency
+
+---
+
+## References
+
+- **Event-Driven Architecture**: Martin Fowler's Event Sourcing pattern
+- **LMAX Disruptor**: High-performance inter-thread messaging
+- **Apache Kafka**: Distributed event streaming platform
+- **SEC Regulations**: Rule 606, Rule 613 (CAT)
+- **FINRA Rules**: Rule 4511 (Books and Records)
+
+---
+
+**Total Lines**: 650+