We define low-latency activity as strategies that respond to market events in the millisecond environment, the hallmark of proprietary trading by high-frequency trading firms. We propose a new measure of low-latency activity that can be constructed from publicly-available NASDAQ data to...

At subsecond horizons bids and offers in U.S. equity markets are more volatile than what would be implied by long-term fundamentals. To assess costs and consequences, the paper suggests that traders' random delays (latencies) interact with quote volatility to generate execution price risk and...