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Low latency allows human-unnoticeable delays between an input being processed and the corresponding output providing real time characteristics. This can be especially important for internet connections utilizing services such as Trading, online gaming and VOIP.
VOIP is tolerant to some degree of latency since a minor delay between input from conversation participants is generally attributable to non-technical issues, but substantial delays may impair communication. On the other hand, online games are more sensitive to latency since fast response times to new events occurring during a game session are rewarded while slow response times may carry penalties (for instance in a first person shooter a slow response time may leave a player in the line of fire for longer periods of time). A player with a high latency internet connection may show slow responses in spite of superior tactics or the appropriate reaction time due to a delay in transmission of game events between said player and other participants in the game session. This gives players with low latency connections a technical advantage and biases game outcomes, so game servers favor players with lower latency connections, sometimes referred to as low "ping" times (typically measured in ms).
Minimizing latency is currently of interest in the capital markets, particularly where algorithmic trading is used to process market updates and turn around orders within milliseconds. Low latency trading refers to the network connections used by financial institutions to connect to stock exchanges and Electronic communication networks (ECNs) to execute financial transactions. Joel Hasbrouck and Gideon Saar (2011) measure latency based on three components: the time it takes for 1)information to reach the trader, 2) the trader’s algorithms to analyze the information, and 3) the generated action to reach the exchange and get implemented. Hasbrouck and Saar contrast this with the way in which latencies are measured by many trading venues who use much more narrow definitions, such as, the processing delay measured from the entry of the order (at the vendor’s computer) to the transmission of an acknowledgement (from the vendor’s computer). With the spread of computerized trading, electronic trading now makes up 60% to 70% of the daily volume on the NYSE and algorithmic trading close to 35%. Trading using computers has developed to the point where millisecond improvements in network speeds offer a competitive advantage for financial institutions.
Low latency is also being discussed in the advertising community, as a form of advertising that responds rapidly to consumer inputs, often from tweets.
- Baldwin,Jaime (2015) Latency: Less is More May 2016
- TABB (2009). High Frequency Trading Technology: a TABB Anthology.
- Mackenzie, Michael; Grant, Jeremy (2009). "The dash to flash" (PDF). Financial Times. Retrieved 18 July 2011.
extracting tiny slices of profit from trading small numbers of shares in companies, often between different trading platforms, with success relying on minimal variations in speed - or "latency", in the trading vernacular.
- Hasbrouck, Joel; Saar, Gideon. "Low-Latency Trading" (PDF). p. 1. Retrieved 18 July 2011.
- Heires, Katherine (July 2009). "Code Green: Goldman Sachs & UBS Cases Heighten Need to Keep Valuable Digital Assets From Walking Out The Door. Millions in Trading Profits May Depend On It" (PDF). Securities Industry News. Retrieved 18 July 2011.
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