The relentless pursuit of speed in high-frequency trading (HFT) has led firms to explore the realm of picoseconds—one trillionth of a second. Sydney-based Nine Mile Financial, the only Australian-owned HFT firm, is at the forefront of this technological arms race. Nine Mile Financial is an HFT firm that uses sophisticated algorithms and technology to trade financial instruments at extremely high speeds. The company provides liquidity to markets, helping investors trade safely and efficiently.
Founder Morgan Potter says the firm is constantly seeking innovative ways to reduce the time it takes to process market data and execute trades. Their latest innovation involves bouncing information off the ionosphere, the outermost layer of the atmosphere, instead of relying solely on fibre optic cables. This approach aims to achieve speeds closer to the speed of light when transmitting data from exchanges like the Chicago Mercantile Exchange to Sydney.
According to Potter, HFT firms play a crucial role in providing liquidity, particularly during periods of market volatility. By using their own capital to facilitate buying and selling, HFT firms help ensure fair pricing and reduce transactional friction. Volatile markets can boost profits, such as the current trading environment where the price of oil has seemed to plunge or surge daily, as bid and offer prices drift increasingly apart.
While some critics, like author Michael Lewis, have argued that HFT firms gain an unfair advantage through superior technology, experts like MacKenzie and Potter contend that they contribute to market efficiency by providing necessary liquidity. MacKenzie told Bloomberg the types of HFTs that actually populate order books were widely considered to have a positive effect on markets. But they were often in direct competition, he said, with HFT firms that took liquidity out of order books. “This is the core of what gives the business its characteristic as an arms race in speed.”
