What Is ‘Latency’ in HFT and Why Is It a Critical Factor?

Latency is the time delay between an event (like a price change) and the execution of the trade in response to that event. In HFT, lower latency is a significant competitive advantage.

It allows the arbitrage bot to react to price discrepancies and execute the trade before slower competitors or before the market self-corrects. High latency increases the risk of slippage and the chance of the opportunity vanishing.