GlossaryAdvanced
Latency Arbitrage
An arbitrage strategy that profits from being faster than other market participants to react to new information or price changes.
Latency arbitrage is an arbitrage strategy (see Kaavon's "Arbitrage" glossary definition) that profits specifically from being faster than other market participants to react to new information or a price change on one venue, trading against slower participants' now-outdated prices on another venue before they can update.
This strategy depends heavily on genuinely minimal technical latency — infrastructure located close to an exchange's own servers, and highly optimized trading systems — making it generally inaccessible to ordinary retail traders without specialized infrastructure.
Examples
- A latency arbitrage strategy might trade against a slower exchange's stale price for a fraction of a second immediately after a price-moving event occurs elsewhere.
- Latency arbitrage's reliance on minimal technical latency generally makes it accessible only to participants with specialized, low-latency infrastructure.