📖 Financial Lexicon Term
What is Arbitrage?
The simultaneous buying and selling of an asset in different markets to exploit tiny differences in price.
Detailed Explanation
Latency arbitrage occurs when a trader exploits the microsecond delay in a broker's price feed compared to the global interbank market. Almost all retail brokers and prop firms explicitly ban latency and toxic arbitrage, confiscating profits from accounts caught using it.
💡 Practical Trading Example
An HFT bot detects that Broker A is quoting EUR/USD 2 pips lower than the global market for 300 milliseconds, and executes a risk-free trade to capture the spread.