Understanding Latency and Its Impact on Trading Profitability

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Understanding Latency and Its Impact on Trading Profitability

Benjamin Franklin wrote in 1748, "Time is money." Never has this been more true than now. 

The speed by which an algorithmic trading application, used by a sell-side institution or hedge fund, can access market information, place an order, and have that order filled is of paramount importance to achieving long-term profitability and maintaining competitive advantage.

In highly fluid markets, however, raw speed is not enough. Accuracy is also critical. The speed and sequence with which market participants place and execute orders at the matching engine of a given exchange venue depend on many technical variables.

This paper outlines considerations to make when deploying such trading platforms and monitoring their performance.