Latency

The responsiveness or ‘turnaround time’ for an order between different parties in an electronic trade. Typically measured between the time the buy-side OMS/EMS sends the order and the broker acknowledgement of the order (Ack Latency) and between the sending of the order and the time of the first fill (Execution Latency). Execution latency includes the round-trip time for the broker to complete the order on the exchange which incorporates both the exchange latency in filling the order and the speed of the link from the broker to the venue. Hence brokers measure the latency of different execution venues as well as of their own communications links. Exchanges which have high internal latency and/or an inability to offer highest speed connectivity to brokers/members can slow down the smart-order routing process, with potential detrimental impact on execution quality. Because latency covers so many different components and in few cases involves a single ‘clock’ statistics provided to show ‘competitive superiority’, whether provided by venues or brokers are inherently unreliable.