c07-glossary

What is Low Latency?

Low latency describes a computer network that is optimized to process a very high volume of data messages with minimal delay (latency). These networks are designed to support operations that require near real-time access to rapidly changing data.

Where is low latency needed?

Low latency is desirable in a wide range of use cases. In a general sense, lower latency is nearly always an improvement over slower packet transport. Low latency is desirable in online gaming as it contributes to a more realistic gaming environment. However, the term low latency is most often used to describe specific business use cases, in particular high-frequency trading in capital markets.

How is low latency used in financial trading?

High frequency trading is entirely automated, with trades executed based on the processing of algorithms that optimize trades based on the changing market prices. Capital markets firms compete on the speed with which these algorithms can be processed and trades executed.