Low latency

Latency is a time interval between the stimulation and response, or, from a more general point of view, a time delay between the cause and the effect of some physical change in the system being observed. Latency is physically a consequence of the limited velocity with which any physical interaction can propagate. This velocity is always lower than or equal to the speed of light. Therefore, every physical system that has spatial dimensions different from zero will experience some sort of latency, regardless of the nature of stimulation that it has been exposed to.

The precise definition of latency depends on the system being observed and the nature of stimulation. In communications, the lower limit of latency is determined by the medium being used for communications. In reliable two-way communication systems, latency limits the maximum rate that information can be transmitted, as there is often a limit on the amount of information that is "in-flight" at any one moment. In the field of human–machine interaction, perceptible latency has a strong effect on user satisfaction and usability.

Online games are sensitive to latency since fast response times to new events occurring during a game session are rewarded while slow response times may carry penalties (for instance in a first person shooter a slow response time may leave a player in the line of fire for longer periods of time). Lag is the term used to describe latency in gaming. A player with a high latency internet connection may show slow responses in spite of superior tactics or the appropriate reaction time due to a delay in transmission of game events between said player and other participants in the game session. This gives players with low latency connections a technical advantage and biases game outcomes, so game servers favor players with lower latency connections, sometimes referred to as low "ping" times (typically measured in milliseconds).

Minimizing latency is of interest in the capital markets, particularly where algorithmic trading is used to process market updates and turn around orders within milliseconds. Low latency trading refers to the network connections used by financial institutions to connect to stock exchanges and Electronic communication networks (ECNs) to execute financial transactions. Joel Hasbrouck and Gideon Saar (2011) measure latency based on three components: the time it takes for 1)information to reach the trader, 2) the trader’s algorithms to analyze the information, and 3) the generated action to reach the exchange and get implemented. Hasbrouck and Saar contrast this with the way in which latencies are measured by many trading venues who use much more narrow definitions, such as, the processing delay measured from the entry of the order (at the vendor’s computer) to the transmission of an acknowledgement (from the vendor’s computer). With the spread of computerized trading, electronic trading now makes up 60% to 70% of the daily volume on the NYSE and algorithmic trading close to 35%. Trading using computers has developed to the point where millisecond improvements in network speeds offer a competitive advantage for financial institutions.

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Wikipedia