What Does High-Frequency Trading - HFT Mean?
A program trading platform that uses powerful computers to transact a large number of orders at very fast speeds. High-frequency trading uses complex algorithms to analyze multiple markets and execute orders based on market conditions. Typically, the traders with the fastest execution speeds will be more profitable than traders with slower execution speeds. As of 2009, it is estimated more than 50% of exchange volume comes from high-frequency trading orders.
Please note the bold highlighted sentence, for high frequency trader, they normally do not care about your system's real latency figure. they just want to ensure that your system is faster than their competitors.
that is also to mean that your system takes less time from market tick received to order leaves for exchange. Remember the key is not how fast your system can be, the key is that your system should be faster than others.
for a similar strategy which takes arbitrage opportunities, the institute which has faster system will grab all market opportunities and leave nothing for competitors. It is not a game that all market participants can share the opportunities. Based on a statistics report, India's high frequency trading firms reduced from 300+ to about 30 in just one year. It is a matter of survival or not based on the speed of the system they used.
the latency war once starts then it will end at the situation that all systems survived in the market will become almost the same speed restricted by current technologies provided. And for high frequency trading, exchange's support is equally important. some exchanges, like that of China, actually limit the possibilities of high frequency trading strategies by putting restrictions in their gateway libraries.