In the fast-evolving world of cryptocurrency trading, latency is profit. As digital asset markets mature, high-frequency traders (HFTs) and institutional market-makers increasingly rely on ultra-low network delays to gain a competitive edge. With many crypto exchanges and trading platforms built on Amazon Web Services (AWS), optimizing infrastructure placement has become a critical factor in achieving superior performance.
One powerful tool now available to both exchanges and market-makers is Amazon EC2 shared cluster placement groups (CPGs)—a feature that enables tighter network proximity between trading engines and matching systems, even when they reside in separate AWS accounts. This article explores how shared CPGs work, their measurable impact on tick-to-trade latency, and best practices for deployment in real-world crypto market-making environments.
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Understanding the Role of Market-Making in Crypto
Market-making is foundational to any liquid financial market. In the crypto space, market-makers provide continuous bid and ask quotes, ensuring that traders can buy or sell assets quickly at fair prices. By capturing the bid-ask spread, these participants earn small but consistent profits—provided they execute trades faster than competitors.
Similarly, arbitrage strategies exploit price differences across exchanges, relying on split-second execution to lock in risk-free gains. Both strategies are highly sensitive to network latency—delays of even microseconds can mean missed opportunities or adverse selection.
In traditional equity markets, firms pay premium fees for colocation services—placing their servers physically close to exchange matching engines. In the cloud-native crypto ecosystem, AWS offers a digital equivalent: cluster placement groups, which optimize virtual proximity within Availability Zones (AZs).
What Are Amazon EC2 Cluster Placement Groups?
An Amazon EC2 cluster placement group ensures that EC2 instances are launched within the same high-speed network segment of an AZ. This reduces network hops and improves:
- Round-trip latency
- Per-flow throughput
- Packet processing rates
Within a single AZ, AWS infrastructure is organized into isolated "cells," each connected through a hierarchical network topology. Without a CPG, instances may be placed across different cells, increasing communication latency. A CPG constrains placement to a single high-bisection bandwidth segment—effectively mimicking the benefits of physical colocation.
Until late 2022, however, CPGs could not be shared across AWS accounts—a major limitation for crypto exchanges and third-party market-makers operating independently. That changed with the launch of Amazon EC2 shared cluster placement groups, enabled via AWS Resource Access Manager (RAM).
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How Shared CPGs Enable Cross-Account Optimization
With shared CPGs, a crypto exchange (the owner) can now extend its optimized network placement to approved market-makers (receivers), even if they operate under different AWS accounts. This collaboration allows market-makers to deploy their trading engines in the same high-performance network segment as the exchange’s matching engine—dramatically reducing end-to-end latency.
Key Steps to Implement Shared CPGs
1. Align Availability Zone IDs
Since AZ names (e.g., us-east-1a) are randomly mapped across accounts, it's essential to use AZ IDs (e.g., use1-az1) to ensure both parties target the same physical location. This can be verified in the AWS RAM console under Your AZ ID.
2. Create and Share the CPG
- The exchange creates a cluster placement group in EC2.
- Using AWS RAM, it shares the CPG with the market-maker’s AWS account ID.
- Permissions granted include
ec2:RunInstances, allowing the receiver to launch instances into the shared group.
3. Launch Instances into the Shared Group
- The market-maker accepts the resource share in their AWS RAM console.
- They then launch EC2 instances—selecting the shared CPG by name or ID during instance setup.
- These instances will show “Shared: Yes” in the EC2 dashboard.
Once deployed, both exchange and market-maker instances reside in the same low-latency network environment, enabling optimal tick-to-trade performance.
Measurable Performance Gains from CPGs
Independent benchmarks using c5n network-optimized instances reveal significant improvements when leveraging CPGs:
Latency Reduction
- 35% lower P50 round-trip latency for TCP flows
- 37% reduction in P90 latency, indicating more consistent performance under load
These gains are crucial in HFT environments where microseconds determine profitability. Even sub-millisecond improvements allow market-makers to react faster to price changes and avoid being front-run by competitors.
Enhanced Packet Processing
- 56% higher packet processing rate for TCP
- 59% increase for UDP traffic
During periods of high volatility—such as major news events or flash crashes—market data feeds spike dramatically. Higher packet processing capacity ensures that trading engines don’t fall behind, maintaining strategy integrity and execution accuracy.
While per-flow throughput (up to 10 Gbps) matters less for real-time trading, it benefits offline operations like backtesting and bulk data transfer, accelerating research and development cycles.
FAQ: Frequently Asked Questions
Q: Do shared CPGs work across multiple Availability Zones?
A: No. CPGs are confined to a single AZ. To maintain low latency, all participating instances must reside in the same physical zone.
Q: Can I use any EC2 instance type with CPGs?
A: Most instance types support CPGs, but for latency-sensitive workloads, we recommend network-optimized families like c7gn, c6in, or r5n. Consider using .metal variants for bare-metal access and reduced hypervisor overhead.
Q: Are there security risks in sharing placement groups?
A: No direct access to instances is granted. Sharing only allows placement within the same network segment. Security groups and VPC controls still govern traffic flow.
Q: How does OS tuning affect latency?
A: Even with optimal networking, poor OS configuration can bottleneck performance. Enable features like enhanced networking (ENA) and consider using tools like DPDK (Data Plane Development Kit) for user-space packet processing.
Q: Can I monitor latency between my instances?
A: Yes. Use tools like ping, netperf, or custom telemetry to measure round-trip times. AWS CloudWatch can also track network metrics at scale.
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Choosing the Right Network Architecture
While CPGs optimize physical proximity, logical connectivity must also be carefully designed—especially when linking VPCs across accounts.
Why VPC Peering Is Recommended Over Transit Gateway or PrivateLink
Services like AWS Transit Gateway and AWS PrivateLink use Hyperplane, a virtualized networking layer that introduces additional hops—even if minimal. Since Hyperplane components are not colocated within CPGs, they can negate some of the latency benefits achieved through tight instance placement.
Instead, Amazon VPC peering provides direct routing between VPCs with no intermediate hops. When used within the same region and AZ:
- Network latency equals intra-VPC levels
- Data transfer incurs no additional cost
- Security remains under full control via route tables and security groups
The main challenge is managing non-overlapping CIDR blocks across organizations. To address this securely, AWS provides a GitHub repository that automates cross-account peering without exposing IAM permissions—ideal for exchanges offering self-service onboarding for market-makers.
Final Thoughts: Building a Competitive Edge in Crypto Trading
In today’s hyper-competitive crypto markets, infrastructure optimization is no longer optional—it’s strategic. Amazon EC2 shared cluster placement groups represent a paradigm shift, allowing independent entities to collaborate on low-latency architecture without sacrificing security or control.
By combining shared CPGs with VPC peering and network-optimized instance types, crypto exchanges and HFT firms can achieve tick-to-trade latencies once only possible in physical data centers. As AWS continues enhancing its Nitro-based infrastructure and expanding global AZ coverage, these advantages will only grow.
Whether you're building a new market-making platform or optimizing an existing one, leveraging shared CPGs is a proven path to better liquidity provision, faster arbitrage execution, and ultimately, higher profitability.
Core Keywords:
crypto market-making, low-latency trading, Amazon EC2 placement groups, high-frequency trading (HFT), network optimization, AWS cloud infrastructure, shared cluster placement groups