What Is a Common High-Frequency Trading (HFT) Strategy That Exploits Market Data Feed Speed Differences?
A common HFT strategy is "latency arbitrage." This involves exploiting the time difference between when market data (e.g. a new price quote) is received by the HFT firm and when it reaches other, slower market participants. The HFT firm can place a profitable trade based on the new information before the rest of the market has a chance to react and update their prices.
Glossar
Market Data Feed Speed
Speed ⎊ Market data feed speed quantifies the rate at which real-time trading information, such as quotes, order book depth, and executed trade prices, is disseminated from an exchange or protocol to market participants.
Exploits
Vulnerability ⎊ Exploits in cryptocurrency derivatives and options trading refer to the successful leveraging of a design flaw or code vulnerability within a smart contract or protocol logic.
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.