How Does Co-Location of Servers Affect the Fairness of Order Execution on a CEX?

Co-location involves allowing market participants to place their trading servers in the same data center as the exchange's matching engine. While it reduces latency for those co-located, it creates an unfair advantage over non-co-located traders, enabling faster order submission and cancellation.

This is a form of structural advantage that facilitates certain types of front-running.