Low Latency (Capital Markets)

Low latency in capital markets refers to the rapid execution of trades and the near-instantaneous transmission of market data with minimal delay. In high-frequency trading (HFT), where speed is critical, low latency systems allow traders to take advantage of market inefficiencies by executing trades milliseconds faster than competitors. The lower the latency, the faster the trades can be executed, which is particularly important in fast-moving markets where prices change rapidly.

Example

A high-frequency trading firm invests in low latency technology to execute trades microseconds faster than competitors, giving it an edge in capturing small price differences.