Latency is the delay between the transmission of information from a source and the reception of the information at its destination.
One specific example is the time that elapses between the placement of an order in an electronic trading system and the execution of that order.
The delay can be affected by factors such as geographical distance or bandwidth congestion.
In simplified terms, latency is a measure of delay.
More specifically, latency describes the time that passes between a price quotation being made and a transaction being confirmed.
Latency can be a consequence of a wide range of technological shortcomings.
- Inadequate network performance can lead to communication latency, or the time needed to communicate between two network nodes.
- Inadequate server processing power, meanwhile, can lead to so-called application latency, or a delay arising because the reply requires a large amount of processing before it can be sent.
- Inadequate computer processing power can prompt memory latency, or the time needed to write or access data in memory within a computer program in order, for example, to run a margin check on a client.