Bullet from the Blue Mountains

What is it about blokes and bragging rights? The male desire to “win” can so often get us into trouble and the investment markets are no exception. The University of Oregon studied thousands of portfolios in 2009 and found those controlled by women performed better by an average 1 per cent a year than those run by men.

It’s no surprise to learn why. Male overconfidence led them to trade far too much and an unwillingness to admit mistakes meant they held on to hopeless stocks for way too long.

The good news for men, however, is that they can now lose money way faster than their mates, thanks to a fascinating little Aussie financial technology start-up called Zeptonics.

These guys are in the business of high frequency trading, a male-dominated domain where one-upmanship also rules, although in this case it’s not so much “mine’s bigger than yours” as “my latency is smaller than yours”.

Latency, in the language of high-frequency trading, is the time delay involved in a trader generating and sending an order to the exchange, the exchange executing the order and it sending a confirmation back.

Zeptonics has come up with a switching device, the ZeptoMux, which, when placed on a trader’s server rack, can get orders to the exchange system in 130 nanoseconds.

That’s 130 billionths of one second, an inconceivably small amount of time to most of us but an aeon to high-frequency traders these days.

“When I was a programmer for a proprietary trading firm a decade ago, we were oriented to latency of a thousandth of a second or two, so if we shaved a few hundred nanoseconds off the network part of the trade [when it’s in transit from the trader to the exchange], no one would really care,” explains Zeptonics founder Matt Hurd. “Now some sophisticated traders are below one millionth of a second latency on their algo engines, so 100 nanos here or there is a big deal. Network devices are suddenly sexy, where once they were just plumbing.”

The New York Stock Exchange uses Juniper switches with latency of 600 nanoseconds, so the ZeptoMux at 130 nanos seems to have captured the Zeitgeist. Hurd has inquiries from 69 countries for a device made in Penrith, at the foot of the Blue Mountains, west of Sydney. A manly measuring contest looks to have turned out well for once.

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