Arbitrage Latency

Arbitrage latency is the time delay between detecting a price discrepancy across different markets and executing a trade to capture the profit. In the highly competitive world of cryptocurrency, this latency is measured in milliseconds or microseconds.

Traders use sophisticated infrastructure to minimize this delay, often collocating servers near exchange matching engines. Low latency is essential for effective arbitrage, as it ensures that price differences are captured before they are eliminated by other market participants.

However, high-speed arbitrage can also contribute to market volatility and place significant load on network infrastructure. Understanding and managing this latency is a key aspect of market microstructure, as it defines the speed at which markets converge to global prices.