By Peter Duffy, CTO, Sumerian
Latency, n. The delay between the receipt of a stimulus and the response to it.
~The New Oxford American Dictionary
The dictionary’s definition of latency is fairly straightforward, but its generality highlights some of the challenges in defining latency within trading systems: what stimuli and responses are we talking about? The reality is that any trading system is composed of multiple components, and each of those components receives stimuli (input data) and produces responses (output data). In order to better understand the holistic latency that runs through all of these systems, it is useful to identify the different categories of latency that exist and discuss the potential solutions that are available for each of them.
Categorisations are always difficult and potentially subjective, but in my mind there are four distinct areas that need to be considered when thinking about latency in trading applications, and each of them has a number of different ways of contributing to holistic latency.