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Opinion: Rationalizing Latency Competition in High-Frequency Trading – Headlands Technologies LLC Blog

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There is a common misunderstanding, even among practitioners, that low-latency trading is a waste of human talent and resources that could instead go to advancing physics or curing cancer. It’s been attacked by books like Flash Boys, governments trying to pass transaction taxes, and exchanges bending to pressure by implementing speed bumps or periodic batch auctions. This essay argues the positive case for HFT and latency competition based on four main reasons: (1) Low latency trading lowers spreads, (2) Economically significant things do happen on sub-millisecond time scales, (3) HFT is the optimization layer for capitalism, and (4) Markets are not a zero-sum game. Latency plays a significant role in how humans interact with the world. When we perceive and respond to stimuli, there is an inherent delay between the occurrence of an event and our reaction to it. This delay, or latency, is typically around 200 milliseconds, which is the time it takes for light to enter the eye, be conver

Introduction There is a common misunderstanding, even among practitioners, that low-latency trading is a waste of human talent and resources that could instead go to advancing physics or curing cancer. It’s been attacked by books like Flash Boys, governments trying to pass transaction taxes, and exchanges bending to pressure by implementing speed bumps or periodic batch auctions. This essay argues the positive case for HFT and latency competition based on four main reasons: (1) Low latency trading lowers spreads, (2) Economically significant things do happen on sub-millisecond time scale

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