Define “Latency Arbitrage” and Its Connection to CLOB Information.
Latency arbitrage is a high-frequency trading strategy where a trader profits from exploiting the tiny time delay (latency) in the transmission or processing of market data between different venues or participants. On a CLOB, a low-latency trader can see a large order and quickly execute a trade on a different venue before the price on the CLOB has time to fully adjust, effectively front-running.
Glossar
Latency Arbitrage
Architecture ⎊ Latency arbitrage, within cryptocurrency derivatives and options trading, fundamentally exploits temporal price discrepancies arising from variations in system speed and network propagation.
CLOB
Execution ⎊ Central Limit Order Books (CLOBs) represent the foundational infrastructure for price discovery and trade execution within cryptocurrency exchanges and regulated derivatives markets, functioning as a digitized order book mirroring traditional financial systems.