What latency should I use for backtesting a high-frequency strategy?

We're developing an HFT strategy for highly liquid futures traded at Eurex. We are planning to colocate our server and to use data feed of QuantHouse and execution API of ObjectTrading. Backtesting is performed on tick data bought from QuantHouse, where timestamps have millisecond resolution (BTW, trades and quotes are sorted separately, so if trades and quotes have a same timestamp, they are not sorted). My question is about latency we should use for backtesting. I define latency as: data feed latency + internal processing time (several microseconds) + execution latency. We simulate this by adding X ms to the feed time (T) of the tick that triggered the trade, then if the last tick with the feed time not later than T + X was a quote we use its book for execution, otherwise (if the last tick with the feed time not later than T + X was a trade) we wait for an incoming quote and its book is used for execution. So my questions are:

1. Is our execution model reasonable?


2. What X should be used for our setup?



3. Could you suggest other (not too expensive) setup in order to reduce any kind of latency?