TrueTrade Clobber: Next-Generation Global Exchange

Latency in order execution can significantly impact trading performance, especially in markets where timing is crucial, like forex and high-frequency trading. Here are some key facts and figures about latency in order execution:

1. Definition of Latency: Latency in trading is the time it takes for an order to be transmitted from the trader's system to the exchange and then executed. This delay can include network transmission times, processing times at the exchange, and the time it takes for an order response to get back to the trader.
2. Impact on Trading: Lower latency leads to faster execution of orders, which can be critical in achieving the best possible prices and maximizing profitability. High latency can result in slippage, where the price at which the order is executed differs from the expected price, potentially resulting in significant losses.
3. Typical Latency Figures:
   • Retail Traders: For most retail traders using standard trading platforms, latency can range from 150 milliseconds to 400 milliseconds.
   • Institutional Traders: With advanced infrastructure, such as co-location services near exchanges, institutional traders can achieve latencies as low as 5 to 10 milliseconds.
   • High-Frequency Trading (HFT): HFT firms, utilizing state-of-the-art technology and direct connections to exchange servers, can achieve latencies in the microsecond range (1 microsecond = 0.001 milliseconds).
4. Factors Affecting Latency:
   • Network Quality: The quality and speed of the network connecting traders to exchanges play a crucial role. Optical fiber networks offer lower latency compared to traditional broadband.
   • Geographical Distance: The physical distance between a trader’s infrastructure and the exchange servers can significantly affect latency.
   • Technology: The hardware and software used for order execution also influence latency. Faster processors, more efficient trading algorithms, and optimized routing technology help reduce latency.
5. Reducing Latency: Traders and firms invest in several strategies to reduce latency, such as:
   • Co-location: Placing trading servers physically close to an exchange’s computer systems.
   • Direct Market Access (DMA): Using sophisticated technology to directly access the exchange's systems without the need for third-party brokers.
   • Optimized Software: Enhancing the efficiency of trading algorithms and the underlying software infrastructure to process and transmit orders faster.

Understanding and managing latency are crucial for traders, especially those engaged in strategies where speed is a significant factor.