Low latency (capital markets)
What is low latency?
In capital markets, firms need low latency algorithmic trading systems in order to increase profitability and react to market events quicker. Low latency means a faster data processing time, so that firms can catch events and profit from them before the market returns to normal.
Where have you heard about low latency?
Ever heard the phrase 'time is money'? Low latency is the capital market materialisation of that. According to the Information Week article, every millisecond in trading applications is worth $100 million a year to a brokerage firm.
What you need to know about low latency.
In an increasingly algorithmic-centred world of trading, low latency is one of the most important things a trading firm needs in order to succeed. If a firm doesn't have low latency, they risk missing out on significant market events that could make them money. That's because other firms that do have low latency will get there first, and within milliseconds the event is over.
Latency is an ever-changing part of trading. Experts predict that in the future, latency will be measured in microseconds – which is why it's important for trading firms to upgrade their systems.