Latency
Market Microstructure glossary · High Frequency Dynamics & Latency Arbitrage
Definition
The time delay between an event occurring and a trader's system responding to it. In modern markets, measured in microseconds. Lower latency confers competitive advantages for HFT strategies.
Latency in plain English
Latency is just "reaction time" for a trading computer — how long between something happening in the market and your system actually responding to it. It matters because if a good price appears, the trader who reacts fastest grabs it first, and everyone else is too late. Think of a group text where a friend offers concert tickets to whoever replies first: the person with notifications on and thumbs ready wins every time. In today's markets this race is run in microseconds (millionths of a second), so firms spend heavily to shave off tiny delays.
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