24 May 2021
Ensuring that trade execution happens as quickly as possible is key to profitability. It doesn’t matter whether you’re a long-in-the-tooth institutional participant or an individual trader dipping your toe in the markets for the first time, as low latency trading is a crucial part of best execution.
Before markets shifted to digital, trades were executed in rapid time. This time reflects the capabilities of the broker and their relationship with their client. If your broker was good at their job and you had enough credibility for them to take notice, then your trade execution could speedily take place.
These days the markets are faster moving and more competitive than ever. Orders can be sent via electronic means from a handheld device anywhere in the world day or night. In many cases, will be executed entirely electronically. Not everything always goes smoothly, however. Delays in trade execution can and do take place. This is sometimes known as trade-related latency.
Any delay in the time it takes for a trader to interact with the market when executing a trade is regarded as trade-related latency. Any delay in any of the elements of live futures trading, such as receiving pricing data, decision-making, and acting on those decisions, can lead to latency. This latency can undermine the profitability of any trading strategy.
Latency costs the trader money, so a trader must take every possible measure to reduce delay in the trading operation. Being aware of where latency can arise is critical to reducing the risk of trade execution latency.
Although a trader needs to be alert to the potential for latency across the trading process, there are three key areas they need to pay particular attention to:
A trader needs to be able to rely on their hardware. They need to be confident that it will work, is secure, and has the capabilities required to trade effectively. In most cases, this will be a desktop computer with sufficient data storage and a big enough processor to work at the speed required. Multiple screens are not essential but can make a positive difference. Lastly, ensure your computer is virus-free and secure.
Having access to the latest information from the markets is key to low-latency trade execution. Bottlenecks at busy trading times and data lag can impact negatively on the internet connection between the client and their broker. Whether at the trader’s set-up or the exchange, software glitches can have a critical impact on speed.
As well as the hardware and connectivity aspects of achieving low latency, perhaps the critical factor in how quickly trade execution can take place is your choice of broker.
At Global Investment Strategy, our execution-only brokerage services are industry-leading.
Our innovative, technology-led approach makes the whole process faster and easier. Crucially, we’re alert to any potential delays or issues that could arise. For us at Global Investment Strategy, best execution means reducing latency to an absolute minimum.
We’re continually troubleshooting, revising and improving our service, responding effectively to any changes that can impact trading speeds to enable our clients to achieve enhanced returns consistently.
To learn more about our world-class global trade execution services, call +44 (0)20 7048 9440 or email info@gisukltd.com. Back to News
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