Understanding the challenges of latency for market makers
One of the most important features of any market making system is performance. For market makers on CME, one of the world’s most liquid markets, employing performant technology has long been of particular importance for running a successful business. Rapid advancements in technology, both on the exchange and the participant side, have driven a latency race that has put increased pressure on market makers over the last few years.
All market participants agree on the importance of latency, and discussions on the topic frequently appear in the media. However, it is not always clear why latency is important to market makers, which general measures can be taken to decrease latency and what low latency is worth. In this article, we take a closer look at these topics.