What Is the Role of ‘Latency’ in CEX Front-Running?

Latency, the delay in data transmission, is a critical factor in CEX front-running, particularly for high-frequency trading (HFT). In traditional front-running, an HFT firm with a co-located server physically closer to the exchange's matching engine has lower latency.

This slight time advantage allows them to receive market data or submit orders milliseconds faster than others. While not strictly illegal unless based on non-public information, this speed advantage allows for sophisticated strategies that can resemble front-running by reacting to market events before slower participants.