Millisecond frequency trading is automated trading in which a system observes the market, decides and sends or cancels orders within thousandths of a second. A millisecond is one thousandth of a second, far shorter than any human reaction. The phrase is used loosely as a label for one band of trading frequency, and it was close to a synonym for high-frequency trading in the years when a millisecond was the frontier of speed.
The frontier has since moved. The fastest firms, using colocation and specialised hardware, now respond in microseconds or less, a thousand times quicker. Trading on a millisecond scale is therefore the slower tier of the speed-sensitive business. It covers strategies that span distant markets, where the travel time of the signal is itself several milliseconds, and systems run from ordinary servers or remote sites without extreme low latency engineering. Automated market making in less competitive instruments and many execution algorithms work at this pace.