How Does 'Latency Arbitrage' Affect the Execution Quality for non-HFT Traders? ⎊ Path

How Does ‘Latency Arbitrage’ Affect the Execution Quality for non-HFT Traders?

Latency arbitrage is an HFT strategy that exploits tiny differences in the speed of market data transmission across different venues. An HFT firm sees a price discrepancy on one exchange before it is reflected on another.

They execute a trade on the slower exchange to profit from the price difference. This results in the non-HFT trader on the slower exchange executing at a worse price than the true market price, which is a form of negative slippage.

How Does Latency Impact the Profitability of a High-Frequency Trading Strategy?

Define “Latency Arbitrage” and How It Is Related to the Speed of a Matching Engine

Define “Latency” in HFT and Explain Its Critical Role in Execution

What Is a Common High-Frequency Trading (HFT) Strategy That Exploits Market Data Feed Speed Differences?

What Is ‘Co-Location’ and How Does It Provide an Advantage to HFT Firms?

What Is ‘Latency Arbitrage’ and How Does ‘Last Look’ Attempt to Mitigate It?

What Is “Colocation” and How Does It Give HFT Firms an Advantage in Minimizing Their Own Slippage?

How Does the Use of High-Frequency Trading (HFT) Algorithms Relate to Front-Running Accusations?

Glossar

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.