How Can ‘Colocation’ Mitigate Latency Risk for Dark Pool Participants?

Colocation is the practice of placing a participant's trading servers within the same data center as the exchange or dark pool's matching engine. This drastically reduces the physical distance data has to travel, minimizing network latency.

For dark pool participants relying on a fast, accurate reference price (like NBBO), colocation ensures they receive and act on that price data with the lowest possible delay, thus mitigating the risk of stale execution.