Neutralise speed‑based arbitrage and adverse selection. Nekuti’s latency floor enforces fairness, transparency, and resilient liquidity, empowering all participants to trade with confidence.
Introduction: Addressing Latency Arbitrage and Adverse Selection
Electronic trading has delivered efficiency gains but also introduced risks. Latency arbitrage, where traders exploit microseconds of speed, and adverse selection erode confidence in liquidity and market quality. Nekuti’s latency floor counters these challenges, reinforcing fairness and operational resilience in today’s fast‑moving environment.
Nekuti’s Latency Floor: Four Core Features
The latency floor integrates four mechanisms that work together to balance liquidity provision and consumption, ensuring transparent and orderly operations:
- Order Window: Non‑maker orders are grouped into consistent time intervals, giving market makers the chance to update quotes and reduce adverse selection risk.
- Prioritisation of Cancels: Cancellation requests are processed first, enabling liquidity providers to manage risk dynamically and quote with confidence.
- Makers Skip Queue: Genuine, non‑crossing maker orders bypass the grouping stage, entering the book immediately to maintain responsive liquidity.
- Randomised Execution: Orders within each window execute in a randomised account‑level sequence, preventing faster participants from dominating outcomes and encouraging broader participation.
Deterministic Processing: Independent Paths for Makers and Takers
Nekuti’s architecture separates maker and taker order flows.
- Maker orders (liquidity provision) are processed immediately, exempt from scheduled batching.
- Taker orders (liquidity consumption) follow the deterministic schedule.
This separation guarantees fairness, transparency, and operational efficiency across both sides of the market.
Benefits
The latency floor delivers direct and indirect advantages for participants and venues:
- Fairness & Transparency: Consistent intervals and randomised execution eliminate speed‑based arbitrage.
- Market Quality & Liquidity: Immediate maker processing and prioritised cancels deepen order books and stabilise spreads.
- Risk Mitigation: Liquidity providers are shielded from toxic flow and adverse selection, enabling tighter, more confident quoting.
- Inclusive Participation: Smaller firms without ultra‑fast infrastructure can compete effectively, fostering diversity and vibrancy.
- Exchange Reputation & Growth: Venues gain trader confidence, enhanced fairness credentials, and sustainable volume growth.
- Regulatory Alignment: Transparent, deterministic mechanisms support compliance with emerging standards for fairness and integrity.
- Market Stability: Neutralising predatory latency strategies reduces disruptive swings and encourages long‑term investment behaviour.
A New Standard for Resilient Exchanges
Nekuti’s latency floor sets a benchmark for fairness and efficiency in electronic trading. By combining consistent order windows, prioritised cancels, immediate maker processing, and randomised execution, it delivers robust resilience and sustainable market quality. As trading evolves, Nekuti’s approach empowers participants and safeguards the health of the wider ecosystem.
