The world’s financial communication networks are a paradigm of the modern world, and they operate at very high speeds through necessity, often using fiber optic technology. So fine are the lines between success and failure in today’s trading environment that just tiny fractions of seconds do matter. When financial institutions trade via these networks, shaving microseconds off network latency can result in a significant competitive advantage and millions of dollars annually. To reduce latency, one must understand the factors that can cause latency.
When talking about computers, latency is a word used to describe how long after you input a command that the results of that command are displayed on the screen. In technical terms, it’s the measured delay involved getting a datagram or packet from one hardware location to another and so obviously, the lower the latency, the better performing the device or network is.