How Do High-Frequency Trading (HFT) Firms Attempt to Gain an Advantage despite the Price-Time Priority Rule?
HFT firms gain an advantage by minimizing latency. They co-locate their servers physically near the exchange's matching engine to reduce network delay.
They also invest in proprietary, high-speed data feeds and use sophisticated algorithms to submit, cancel, and modify orders faster than competitors. While they cannot break the price-time rule, they ensure their orders are among the first to reach the matching engine at the best price, securing the time priority.
Glossar
Gain
Definition ⎊ In financial markets, gain refers to the positive difference between the current value of an asset or investment and its initial cost basis.
HFT
Velocity ⎊ This strategy relies on ultra-low latency infrastructure to execute a massive volume of orders in fractions of a second, capitalizing on minute price discrepancies.