Latency Arbitrage
Market Microstructure glossary · High Frequency Dynamics & Latency Arbitrage
Definition
An HFT strategy that profits from the time gap between price updates on different venues or feeds — e.g., trading against a stale quote on a slow venue using fresh information from a fast one.
Latency Arbitrage in plain English
Latency arbitrage is a fast-trading strategy that profits from the fact that not everyone sees a price change at the same instant. If one exchange updates a stock's price a split-second before another, a super-fast trader can buy at the old, now-outdated price on the slow venue before it catches up — nearly risk-free. It's like knowing the lottery numbers a moment before the corner store's screen updates, then buying the winning ticket at the old odds. The profit per trade is tiny, but done millions of times with almost no risk, it adds up.
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