Latency arbitrage is trading on a price signal that has moved before the order book has repriced to match it. The edge is speed rather than insight: the trader is acting on public information the resting quotes have not yet reflected.
On crypto Up/Down markets the natural version reads a fast spot feed and takes stale quotes on the prediction market before they update. The edge is measured in the tens or hundreds of milliseconds, and it is the mirror image of the adverse selection a market maker experiences.
Measuring the size of the edge without measuring your own round-trip time. An edge that persists for 200ms is not available to a stack that takes 400ms to react.
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