Latency Arbitrage with Predatory Algorithm for Trading
Latency arbitrage is the practice of one party, perhaps a predatory HFT firm, exploiting a time disparity and earning profits with a computer algorithm for trading, when that trade is executed solely because of a latency advantage. Latency arbitrage has raised many heated discussions among all market participants, the SEC and government law makers for many years, yet this unfair unequal access to US equity markets is still the main strategy of many predatory firms.
Let’s take a look at what exactly latency arbitrage means, why it occurs, and what we can do about it. (more…)