At some point in my career I first heard the term ‘low-latency.’ I don’t recall the date, nor do I recall the context with which the term was referenced, but I do recall thinking that ‘low-latency’ must be important.
Why did I feel it must be important? Just look at the words on their own: ‘low-latency.’ It immediately conveys a sense of urgency. I immediately get a sense of gravitas, as opposed to, say, ‘really fast’ or ‘super quick,’ which seem meek by comparison.
Why then has the industry been inundated with requests for ‘low-latency’? Why have regulators sparked inquiries about access to the markets via ‘low-latency’ routes? Would the industry review regulations if traders were looking to access the markets really quickly?
Or if systems were being developed to allow firms to trade via fast technology? Perhaps. However, I don’t get the sense that prop trading firms would be highlighted on 60 Minutes if they were merely fast trading into the exchanges. If HFT firms were merely quick, would we cast the same aspersions, as we quietly think to ourselves, ‘what do they know that we don’t?’
So ‘low-latency’ has entered our lexicon. And exchanges, MTFs, vendors and market participants are all better for it. In fact, a strong argument could be made that the industrial revolution was a mere leap in latency. Couldn’t we also make the argument that any technological advance such as the telegraph, the telephone, the fax, and the email, were all mere milestones in lowering latency in how people communicate? Surely, how the industry interacts with the markets also reflect milestones in lowering latency.