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.