Atomic Swaps on Arwen
Arwen trades execute as off-blockchain atomic swaps.
Atomic swap of 1 BTC for 100 LTC cryptographically guarantees that:
(1) if the user transfers her 1 BTC to the exchange, even a compromised or malicious exchange cannot prevent the user from claiming her 100 LTC, and
(2) if the exchange transfers its 100 LTC to the user, even a malicious user cannot prevent the exchange from claiming its 1 BTC
This is a higher standard of security than the “second send’’ approach (used by ShapeShift and many OTC desks) where the user first transfers her 1 BTC to the exchange and claims her 100 LTC second. In the “second send’’ approach, a compromised or malicious exchange can accept the user’s 1 BTC but then refuse to send the user her 100 LTC.
Arwen's atomic swap trades happen instantly. Nothing is posted to the blockchain during a trade. Trading involves cryptographic messages sent between the user and the exchange, escrow balances adjust appropriately. Because these messages are visible to no other party, each trade is protected from front running and griefing.
The only on-blockchain transactions are
(1) depositing coins into escrow, which replaces deposit into exchange custody
(2) "Clearing", which is the movement of coins from respective user and exchange escrows to designated user and exchange wallets.
For a deeper technical dive, you can review the Arwen whitepaper.