How Does Co-Location Benefit High-Frequency Traders in a CLOB Environment?
Co-location involves placing a trader's servers physically within the same data center as the exchange's matching engine. This drastically reduces the network latency between the trader's system and the exchange.
In a CLOB environment, where trades are matched on price and time priority, this millisecond advantage is crucial for high-frequency traders to react faster and gain an execution edge.
Glossar
Millisecond Advantage
Latency ⎊ The millisecond advantage, within cryptocurrency, options, and derivatives markets, fundamentally represents a temporal edge ⎊ the ability to execute trades or access market data fractions of a second faster than competitors.
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.