Explain How API Rate Limits Can Hinder High-Frequency Spatial Arbitrage.
API rate limits restrict the number of data requests or trade orders an arbitrage bot can submit to an exchange within a given time frame. High-frequency spatial arbitrage requires continuous, rapid data feeds and the ability to submit orders instantly.
Rate limits can cause the bot to miss fleeting opportunities or fail to update its strategy quickly, leading to stale data and potentially failed trades.
Glossar
Fleeting Opportunities
Arbitrage ⎊ Fleeting opportunities within cryptocurrency, options, and derivatives frequently manifest as temporary arbitrage discrepancies across exchanges or related instruments.
API
Interface ⎊ Within cryptocurrency derivatives and financial engineering, an Application Programming Interface (API) serves as a crucial intermediary, facilitating programmatic access to market data, order execution functionalities, and risk management tools.
Rate Limits
Constraint ⎊ Rate limits within cryptocurrency, options trading, and financial derivatives represent predetermined restrictions on the frequency or volume of requests an API or trading system can execute over a defined period.
Spatial Arbitrage
Mechanism ⎊ Spatial arbitrage within cryptocurrency derivatives exploits temporary pricing discrepancies for the same asset across different exchanges or derivative markets, seeking risk-free profit through simultaneous purchase and sale.
API Rate Limits
Constraint ⎊ API Rate Limits within cryptocurrency, options trading, and financial derivatives represent engineered restrictions on the number of requests a client application can make to an exchange or data provider over a given timeframe.