Understanding Latency and Trading Speed: Insights from Lime Trading’s Johan Sandblom
In the fast-paced world of trading, every millisecond counts. Recently, Traders Magazine sat down with Johan Sandblom, President and Head of Business Development at Lime Trading, to discuss the crucial role of latency and trading speed in achieving success in the markets. Here’s a breakdown of their conversation, offering expert insights into how latency impacts execution quality and what traders can do to stay competitive.
Why Latency Matters in Trading
Traders Magazine: “How and why is latency important in trading?”
Johan Sandblom: “Latency is important because it affects execution quality. Thinking about how it affects queue positioning – if you and I both want to buy 100 shares of Microsoft right now and you are using the faster system, you’re going to get executed first and I’m going to sit in the queue. It’s like being in line behind you at the grocery store – I’m going to have to wait.
So, while queue positioning isn’t necessarily something people think about much, it matters because it affects execution quality, which in turn affects the overall performance or alpha of a strategy. This is especially the case if you’re doing hundreds or thousands of trades daily.”
Key Components of Low Latency and Competitive Trading Speed
Traders Magazine: “What are the important components of low latency and having at least competitive trading speed?”
Johan: “I think a lot of folks out there don’t have a good understanding of what physical location means. For example, if you are in Secaucus (NJ), you have close access to the CBOE venues that are there, but if you’re sending orders from Secaucus to NASDAQ in Carteret, about 20 miles away, it’s going to take a couple hundred microseconds for the order to get there. So, if you’re in Secaucus and I’m in Carteret and we’re both trading on NASDAQ, I’m going to beat you every single time.
It’s the same for NYSE in Mahwah, which is even further away. If you trade a lot on the NYSE, you should consider being in Mahwah physically to cut out the hundreds of microseconds that it can take for an order to get to Mahwah from a different exchange co-location center.
Another important component of low latency pertains to the (US Securities and Exchange Commission) market access rule, 15c3-5, which requires firms like us to do pre-market risk checks. But there are differences in how quickly brokers can do that check – some firms do it in the seconds, some in the hundreds of milliseconds, others in microseconds, even single digit microseconds. So, if you’re an active trader for whom latency is important, you most likely want to work with a broker that has a check with very low latency, otherwise your orders will be held up.
It’s helpful for trading firms to measure and understand where their latency is coming from. This includes geography; what network components your broker uses; the number of hops the order takes from the client to the exchange; and simplicity of the technology. Eventually, I think we will see more transparency into fill rates and information leakage and things like that. But until then, if latency is important, clients should understand how to measure latency with their current broker and understand where the bottlenecks are.”
Lime Trading’s Low-Latency Solutions
Traders Magazine: “What does Lime Trading offer in terms of low latency and fast speed?”
Johan: “We provide infrastructure, technology, security, and reliability. We are in all three co-location centers – Carteret, Mahwah, and Secaucus. As members of all US equity exchanges, we have direct market access, which cuts down the hops. And we have dark fiber links for a mesh network between the different data centers.
On the trading technology side, we provide direct market access, we have smart order routing, and we have benchmark algos. We have simplified APIs for integration of trading and workflow and strategies via flexible integration such as FIX API, C++, Java, Python, C-sharp, and binary exchange protocols. For security and reliability, we are compliant with market access rule 15c3-5, and we have a low-latency pre-trade risk control with real-time risk and synchronization across all trading sites.”
Optimize Your Trading Strategy with Low Latency
To stay ahead of the competition, traders should prioritize low-latency systems and strategies. Understanding latency’s impact, measuring it effectively, and ensuring you have the right technology in place can be the difference between success and missed opportunities in today’s fast-moving markets.
This article contains excerpts from an article published by Trader’s Magazine in February 2025 with quotes by Johan Sandblom, President of Lime Trading Corp. and a summary by Lime Trading.
The entire article can be read at tradersmagazine.com/departments/brokerage/execution-matters-assessing-latency-and-trading-speed. High frequency trading is only for sophisticated investors with high risk tolerance. You may lose more than your initial investment.