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Co-location is the practice in which traders, members and non-members place their computers and trade servers containing their algorithms next to an exchange's matching engine in order to capitalize on a low-latency environment. In the world of high frequency trading and execution, the distance the signal from the trader's computer must travel to the matching engine determines which trade in the exchange's FIFO execution algorithm is processed first. Speed is the most crucial component in the HFT space. [1]


  1. Co-Location. FT Lexicon.