Hold time is a discretionary delay between order reception and execution.
Hold time measures the discretionary element of execution latency, which is the time observed by the trader between placing an order and receiving notification of the fill
Execution latency is the time taken between an order being transmitted from the trader’s system and the receipt of a response.
“Hold time” is the commonly used name for discretionary latency where the execution of an inbound order from a trader is deliberately delayed pending a decision to fill or reject by the liquidity provider’s systems.
This period of time is also referred to as the last look window.
Discretionary latency is any time added where the order is held prior to executing a trade.
Liquidity providers (LPs) may apply or vary hold time based on their assessment of a customer’s market impact, the current market conditions, or their own appetite to trade in a given direction.
Higher hold times and execution latencies not only exacerbate the opportunity cost associated with rejects but also represent an opportunity cost on filled orders because, while the trader is waiting for a response, they are committed to honoring the potential trade and may be unable to execute the remainder of their strategy.