Why Is Low Latency Crucial for Minimizing Execution Costs in Arbitrage?

Low latency, meaning minimal delay in data transmission and order execution, is crucial because it reduces the time window for the market price to change. A high-latency connection increases the risk of slippage, which is a form of execution cost.

By executing trades faster, the arbitrageur ensures the trade is filled closer to the price that was initially observed, thus preserving the profit margin. Low latency is a competitive edge.