System Design Interview Questions at Trading Firms

System design interviews at trading firms ask candidates to design a feed handler or a risk layer, and the strong answers name real components, not generic patterns.

System design interviews at trading firms ask candidates to design a specific piece of the pipeline described across this site's infrastructure guides, most often a market data feed handler, a pre-trade risk layer, or the path an order takes from a strategy decision to an exchange acknowledgement, and the interviewers are checking whether the candidate reasons from the real constraints of the domain rather than reciting a generic distributed systems answer written for a web application.

A strong answer starts with the exchange's actual delivery mechanism, multicast UDP over redundant A and B lines, and explains how a handler tracks sequence numbers on each line and arbitrates between them, rather than jumping straight to a generic discussion of message queues. It then covers gap detection and recovery, either through a retransmission request or a periodic snapshot, and distinguishes a handler that has stopped from one that is running but falling behind, since the mechanics of catching each are different, a distinction covered in detail in feed handlers and their failure modes.

A weak answer treats market data like any other network input and defaults to a generic pub-sub description without addressing sequence numbers, redundancy, or what happens when the handler cannot keep up, which signals the candidate has not worked with, or studied, how exchange data actually arrives.

This question tests whether a candidate can name the specific checks a risk layer runs, maximum order size, maximum position, a price collar, and a message rate limit, and explain why each check has to complete in microseconds without becoming the bottleneck in the order path. It also tests whether the candidate places the risk layer as an independent process the strategy cannot silently reconfigure, a design choice tied directly to the lessons of the 2012 Knight Capital deployment failure, covered fully in risk checks between a strategy and the exchange.

Interviewers frequently follow up by asking what happens when a limit is breached, checking that the candidate describes a kill switch that cancels working orders and flattens the position, not merely a rejection of the one offending order.