Exchange vs Receive Timestamps and Latency Measurement

Latency is the time between something happening and your system responding to it. For a long term investor, seconds do not matter. For an intraday bot, a delay of a few hundred milliseconds can turn a good signal into a bad fill. For high frequency firms, microseconds decide who wins. Whatever your speed, you cannot improve latency without measuring it, and measuring it correctly takes more care than simply subtracting two times. This lesson covers how to measure; Latency in Trading explains why it matters.

Where latency comes from#

Key measurements#

Timestamp at every boundary#

Record a timestamp when each message arrives, after decoding, when the strategy decides, when risk checks finish and when the order leaves. The difference between adjacent timestamps shows exactly where time is spent.

import time
t0 = time.perf_counter_ns()      # message received
msg = decode(raw)
t1 = time.perf_counter_ns()      # decoded
order = strategy.on_message(msg)
t2 = time.perf_counter_ns()      # decided
send(order)
t3 = time.perf_counter_ns()      # sent
record(decode=t1 - t0, decide=t2 - t1, send=t3 - t2)

Use a monotonic clock such as perf_counter_ns for durations inside one machine; it never jumps backwards when the system clock is adjusted. Comparing times across machines needs synchronised clocks. See Clock Synchronization and PTP.

Use percentiles, not averages#

Latency distributions have long tails. The average hides rare but costly delays. Report the median (50th percentile), 99th and 99.9th percentiles, and the maximum.

Common bottlenecks#

Measuring against the venue#

Some venues include their own receive and send timestamps in acknowledgements, letting you split round trip time into network and venue processing. Record these and compare over time; changes can reveal network problems or venue load.

How fast is fast enough?#

Spend effort where it changes results. See High-Frequency Trading.

Frequently asked questions#

What is tick to trade latency?#

The time from receiving the market data that triggers a decision to sending the resulting order.

Why use percentiles for latency?#

Latency has long tails; percentiles such as the 99th show the rare slow events that averages hide.

How do I measure latency in Python?#

Record time.perf_counter_ns() at each processing stage and analyse the differences, using synchronised clocks for comparisons across machines.

Next, learn how recorded data helps testing in Market Data Replay.