How Does Latency Arbitrage Differ from True Front-Running on a CEX? ⎊ Path

How Does Latency Arbitrage Differ from True Front-Running on a CEX?

Latency arbitrage is a form of high-frequency trading where a firm exploits a tiny time delay (latency) in the transmission of price data between different exchanges or data feeds. They see a price change on one venue and trade on another before the price updates there.

True front-running, however, involves using non-public information about a client's pending order to trade ahead of it. Latency arbitrage exploits public data transmission speed, while front-running exploits confidential order flow.

What Is the Difference between Front-Running and Latency Arbitrage in Traditional Options Trading?

How Does Front-Running Relate to Information Leakage in Public Crypto Markets?

How Do Traditional Options Market Regulations on Front-Running Compare to Crypto Rules?

Is Latency Arbitrage Considered Illegal Market Manipulation by US Regulators?

What Is the Role of the Securities Information Processor (SIP) in Mitigating Latency Arbitrage in Traditional Markets?

What Is the Difference between Front-Running in CEXs and DEXs?

What Is the Legal Distinction between Front-Running and High-Frequency Trading (HFT) Strategies?

How Do Wash Trading and Spoofing Differ from Front-Running?

Glossar

Latency Arbitrage

Architecture ⎊ Latency arbitrage, within cryptocurrency derivatives and options trading, fundamentally exploits temporal price discrepancies arising from variations in system speed and network propagation.