Latency risk, or the avoidance thereof, is a game played by virtually every market participant. It's common knowledge on Wall Street that falling behind the speed leaders can cost a broker a fortune in commissions, and the slower a firm goes, the more money it's likely to lose.

Despite this fact, brokers still are exposing a significant portion of their commissions to latency risk, reports TABB Group. According to a new research note from the Westborough, Mass.-based research group, 16 percent of all U.S. institutional equity commissions, or $2 billion, currently are exposed to latency risk.

TABB Group estimates that if a broker's electronic trading platform leaves it just 5 milliseconds behind its competitors' systems, the broker could lose more than 1 percent of its order flow. Ten milliseconds of latency can result in a 10 percent drop in revenues, TABB Group says. If a broker is 100 milliseconds behind the fastest competitor, the firm adds, it might as well pack up its electronic trading operations and become a floor trader.