Does the Use of a Reference Price from a Lit Exchange Introduce Latency Risk?

Yes, using a reference price from a lit exchange introduces latency risk. The reference price, like the NBBO, is constantly changing on the public exchange.

If the dark pool's execution is delayed, the reference price may have moved significantly by the time the trade is executed. This can result in a suboptimal fill price, even with midpoint matching.

High-speed trading systems constantly work to minimize this latency.