Latency-Compensating Market Making: An AI Framework for Retail Liquidity Provision

High-frequency market makers profit by being faster than everyone else — co-located servers, microwave links, and fiber routes optimized to the millisecond. For retail traders and non-institutional algorithms operating under execution delays of 200 milliseconds to 2 seconds, participating in market making has been effectively impossible: by the time a quote is submitted, the market has already moved, and the slow trader absorbs the loss. This latency gap is not merely a competitive disadvantage — it is a structural barrier that concentrates a recurring and significant source of financial returns among a small number of technologically privileged firms. Proposed market design reforms, including speed bumps and frequent batch auctions, address this asymmetry at the exchange level but remain unadopted at scale and offer no recourse to the individual participant. This paper proposes latency-compensating market making: an AI-driven framework in which predictive models trained on limit order book microstructure data substitute for execution speed by anticipating market conditions within the trader's latency window. We develop a two-component system — a deep learning fill probability estimator using survival analysis, and a latency-aware reinforcement learning agent for dynamic quote optimization — and formalize the conditions under which prediction-based compensation is theoretically viable. We outline an empirical research agenda targeting cryptocurrency markets, where retail participation in liquidity provision is structurally accessible, and position this framework as a contribution to the broader question of how artificial intelligence can reduce structural inequities in market access. This work connects market microstructure theory, machine learning methodology, and financial regulation, with direct implications for policymakers designing equitable market infrastructure and for the growing population of retail algorithmic traders seeking meaningful participation in modern financial markets.