From picoseconds to seconds – timescales involved in electronic trading
Low latency and high frequency trading are often mistaken one for another. Both are interrelated. Both involve advanced technology. But they can prioritise competing definitions of performance. Analogies from the quotidian life help to distinguish these concepts. Talking about coffee :
The next analogy illustrates further the respective features of both concepts…
In computer networking, data is transmitted in chunks (network packets). Just like the thoughtful bus driver, in the previous section, Nagle’s algorithm waits to pack more data before sending a TCP IP network packet. This strategy increases the throughput by avoiding nearly empty packets to being sent over the network. However, this automatically increases the latency.
For that reason, just as the ambulance driver will skip traffic lights, low latency data transfers do not rely on such techniques. Instead, network protocols such as UDP, while less suitable for transfers of huge amount of data, are better at transferring data immediately, thus suitable for low latency.
Both low latency and high frequency businesses focus on speed and benefit from a fast transport of data. But as their priorities diverge, they sometimes adopt competing strategies.
When low latency is a business requirement
As early as 2006, the head of a European investment bank option trading desk formulated the following business requirement:
I want the response time from the algo to the execution to be less than 1 millisecond.
Since then, this maximum latency figure, which was already 200 times faster than a blink of the eye, has been divided by several orders of magnitude. Examples of businesses where low latency is a core requirement feature:
Market makers must be as fast as the fastest traders on the venue they are providing liquidity on. 
When low latency reduces transaction costs
Not all trading scenarios do require low latency. However, latency has a detrimental impact on most intraday trading:
When low latency is a nice thing to have
High latency is never a selling point. Low latency is costly to implement. In between, some firms may just want to keep latency under control, without incurring the costs of a delayed execution, nor the investment costs in managing low latency software.
 A topic dear to quality proofreaders and quantitative traders alike (author’s private opinion) | Jul 23
 David Gross | Meeting C++ 2022 “Trading at light speed: designing low latency systems in C++” | Nov 22
 PICO | https://www.pico.net/corvil-analytics/trading-analytics/market-maker/ | Retrieved July 23
 Daniel Shaya | London Java community talk “How low can you go? Ultra low latency Java in the real world” | Oct 18
 Jason Mc Guiness | A Performance Analysis of a Simple Trading System… | Mar 21
 Timur Doumler | CppCon 2016 “Want fast C++? Know your hardware!” | Oct 16
 Carl Cook | CppCon 2017 “When a Microsecond Is an Eternity: High Performance Trading Systems in C++” | Sep 17
 Keysight Technologies | Understanding Latency and Its Impact on Trading Profitability | Mar 20