Latency
The time elapsed between sending an instruction and its effect being registered by the exchange.
How it is identified
Round-Trip Latency = time from order transmission to receipt of the exchange's acknowledgement
Unit
qualitative
In depth
Latency matters only in proportion to how fast the opportunity decays: for a market maker it is the whole business, for an investor holding for years it is noise. It has several components — network, broker risk checks, exchange gateway and matching engine — and reducing one while ignoring the others buys nothing. Retail platforms add tens or hundreds of milliseconds through their own layers, which is why a retail order can never win a race with a co-located one. The correct response is not to compete on speed but to choose strategies whose edge does not depend on it.
Worked example
A retail order may take 150 milliseconds to reach the matching engine, a co-located one 50 microseconds — about 3,000 times faster. On a strategy targeting a move over three weeks, that difference is entirely irrelevant.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Latency” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.