Crypto Market-Making Latency and Amazon EC2 Shared Placement Groups

In the fast-evolving world of digital assets, latency is more than a technical detail—it’s a competitive edge. As cryptocurrency transitions from a niche experiment to a multi-billion-dollar financial ecosystem, high-frequency traders (HFTs) and crypto exchanges are increasingly focused on optimizing every microsecond of trading performance. With many crypto platforms built on Amazon Web Services (AWS), the cloud has become the new frontier for low-latency trading strategies like market-making and arbitrage.

A pivotal advancement in this space is the introduction of Amazon EC2 shared cluster placement groups (CPGs)—a feature that allows crypto exchanges to extend their low-latency network infrastructure to HFTs operating in separate AWS accounts. This capability enables tighter network proximity between exchange matching engines and market-maker trading systems, mirroring the advantages once exclusive to physical colocation data centers.

Understanding Market-Making in Crypto

Market-making plays a vital role in ensuring liquidity across cryptocurrency exchanges. By continuously placing buy and sell orders, market-makers help narrow the bid-ask spread, making it easier and faster for investors to trade. In return, they profit from the spread—small but frequent gains that compound with volume and speed.

Similarly, arbitrage strategies capitalize on price differences of the same asset across exchanges. These strategies rely heavily on ultra-low latency: the faster a trader can detect and act on a pricing discrepancy, the greater their chance of profit before the market corrects itself.

👉 Discover how low-latency infrastructure can boost trading performance

For both strategies, success hinges on minimizing tick-to-trade latency—the time between receiving market data and executing a trade. Even microseconds matter. In traditional equity markets, over 90% of orders are executed or canceled within the first 100 microseconds. The same urgency now defines competitive crypto trading.

The Role of Amazon EC2 Cluster Placement Groups

Amazon EC2 cluster placement groups (CPGs) are designed to reduce network latency by placing EC2 instances physically closer together within an Availability Zone (AZ). Without a CPG, instances may be distributed across different network spine cells, increasing communication delays.

When instances are launched into a CPG:

• They reside in the same high-bandwidth network segment.
• Network traffic experiences lower latency and higher packet processing rates.
• Per-flow throughput can reach up to 10 Gb/s.

Until late 2022, CPGs could not be shared across AWS accounts—posing a challenge for exchanges and external market-makers who operate independently. The launch of shared CPGs via AWS Resource Access Manager (RAM) changed that, enabling secure cross-account collaboration while preserving performance benefits.

How Shared CPGs Work: A Step-by-Step Overview

Consider a scenario involving two parties:

• Crypto Exchange (Owner Account): Runs matching engines on EC2 instances within a CPG.
• Market-Maker (Receiver Account): Wants low-latency access to those engines.

Step 1: Align Availability Zones Using AZ IDs

Since CPGs are confined to a single AZ, both accounts must use the same physical zone. While AWS assigns AZ names (e.g., us-east-1a) randomly per account, AZ IDs (e.g., use1-az6) map consistently across accounts in a region.

Use the AWS RAM console to verify which AZ name corresponds to the desired AZ ID in each account.

Step 2: Create and Launch Into a CPG (Owner)

1. In the EC2 Console, go to Placement Groups > Create placement group.
2. Choose Cluster strategy and assign a name.
3. Launch EC2 instances into this group under Advanced Details during instance setup.
4. Note the Placement Group ID—this will be used by the receiver.

Step 3: Share the CPG via AWS RAM

1. Open the AWS RAM Console > Create resource share.
2. Select Placement Groups, then choose your CPG.
3. Add permissions (automatically includes ec2:RunInstances).
4. Share with the market-maker’s AWS account ID.
5. Confirm status changes to Active once accepted.

Step 4: Accept and Launch (Receiver)

1. In the receiver account, go to Resource shares > Shared with me.
2. Accept the incoming share.
3. Launch EC2 instances into the shared CPG using the Placement Group ID (recommended over name to avoid conflicts).

Now, both exchange and market-maker instances operate in close network proximity—maximizing performance.

Performance Gains from CPGs

Tests using network-optimized c5n instances and netperf benchmarks demonstrate measurable improvements:

Latency Reduction

• TCP round-trip latency: 35% lower at P50, 37% lower at P90.
• UDP flows: Similar reductions, crucial for high-speed market data feeds.

Packet Processing Boost

• TCP: 56% increase in packet processing rate.
• UDP: 59% improvement—critical during volatile market conditions.

These gains mean faster reaction times, reduced jitter, and higher reliability for live trading systems.

👉 See how top traders leverage infrastructure for speed

Logical Network Architecture: Choosing the Right Connectivity

Even with optimal physical placement, logical connectivity matters. For cross-account setups, several AWS services offer inter-VPC communication:

Why? Services like Transit Gateway and PrivateLink use AWS Hyperplane, a virtualized networking layer that introduces additional hops—negating some of the latency benefits achieved through CPGs.

Why VPC Peering Is Ideal

• No added latency within the same region.
• No data transfer costs within the same AZ.
• Direct routing between VPCs.

However, VPC peering requires:

• Non-overlapping CIDR blocks.
• Cross-account IAM permissions for configuration.

To simplify secure deployment, AWS provides an open-source solution:
👉 Automate cross-account VPC peering securely

This GitHub repository uses AWS CloudFormation to enable self-service peering without granting full IAM access—perfect for security-conscious exchanges and HFT firms.

Key Considerations for Implementation

• Instance Selection: Use network-optimized types like c7gn, c6in, or r5n. Prefer .metal variants when available.
• Enhanced Networking: Enable via ENA or Elastic Fabric Adapter (EFA) for better throughput.
• OS & Application Tuning: Optimize kernel settings, thread affinity, and memory management.
• Benchmarking: Always test with real-world workloads—results vary by AZ size and layout.

Frequently Asked Questions (FAQ)

Q: Can shared CPGs span multiple Availability Zones?
A: No. Cluster placement groups are limited to a single AZ to ensure physical proximity and low latency.

Q: Do I need AWS Organizations to use shared CPGs?
A: No. AWS RAM allows sharing across any AWS accounts, whether inside or outside an Organization.

Q: Is VPC peering required when using shared CPGs?
A: Not strictly required, but it's strongly recommended for lowest latency. Other inter-VPC solutions add hops that degrade performance.

Q: Can I monitor latency between my instances in a shared CPG?
A: Yes. Use tools like ping, iperf3, or netperf for real-time measurements. CloudWatch can also track custom metrics.

Q: Are there security risks in sharing placement groups?
A: Sharing only allows launching instances into the group—not access to existing instances or data. Security groups and network ACLs still control traffic.

Q: Can I use shared CPGs for non-trading workloads?
A: Yes. Any latency-sensitive application—such as real-time analytics or HPC—can benefit from improved network proximity.

By leveraging Amazon EC2 shared cluster placement groups, crypto exchanges and HFTs can replicate the performance advantages of traditional financial colocation within the cloud. Combined with strategic use of VPC peering and optimized instance types, this architecture delivers measurable gains in speed, efficiency, and profitability—proving that in high-frequency trading, infrastructure isn’t just support—it’s strategy.