High-frequency trading is pushing into a new frontier. The battle is no longer measured in milliseconds or even nanoseconds. It is now being fought in picoseconds.
A picosecond is one trillionth of a second, and for modern trading firms, that difference can define who wins and who loses in global markets.
At the centre of this shift is a growing arms race in speed, where firms compete to process and act on market data faster than anyone else.
The Race to Be First Is Intensifying
High-frequency trading firms operate on a simple principle. The faster they receive and act on information, the more profitable their strategies can be.
Even the smallest delay in receiving data from major exchanges such as the Chicago Mercantile Exchange can create an opportunity for a competitor to step ahead.
For firms like Nine Mile Financial, the challenge lies in reducing the time it takes for data to travel across the globe, particularly between Chicago and Sydney.
Founder Morgan Potter describes the industry as the financial equivalent of Formula 1 racing, where marginal gains in speed translate directly into performance advantages.
From Fibre Optics to the Edge of Space
The latest innovation highlights how far firms are willing to go to gain that edge.
Instead of relying solely on fibre optic cables, some firms are experimenting with transmitting data by bouncing signals off the ionosphere, the outer layer of Earth’s atmosphere.
This approach reduces latency by shortening the distance signals must travel compared to undersea cables.
“We’re all trying to get as close to the speed of light as possible,” Potter said.
The implication is clear. Technology, not human decision-making, now defines the limits of trading performance.
Volatility Creates Opportunity
The current market environment has reinforced the importance of speed.
Rising geopolitical tensions, particularly in the Middle East, have driven sharp swings in oil prices and global equities. That volatility has pushed the CBOE Volatility Index higher, reflecting increased uncertainty.
For high-frequency traders, this creates ideal conditions.
Academic research suggests that volatile markets widen bid-ask spreads and increase price dislocations, allowing HFT firms to capture small profits repeatedly across trades.
Quan Gan from the University of Sydney noted that these firms can structure positions to profit from rapid moves in either direction, often using combinations of options to benefit from price swings.
Market Structure Is Shifting Toward Machines
The rise of high-frequency trading reflects a broader transformation in financial markets.
Traditional trading floors have largely disappeared, replaced by algorithm-driven systems operating at speeds beyond human perception.
Donald MacKenzie from the University of Edinburgh points out that humans cannot meaningfully process time intervals below a tenth of a second. Modern markets operate far beyond that threshold.
“We’ve moved from a human-centred form of trading to a machine-centred form of trading,” he said.
As artificial intelligence continues to evolve, the role of human traders is likely to shift further toward oversight rather than execution.
Liquidity Providers or Market Advantage?
High-frequency traders often face criticism for their speed advantage.
The debate gained attention following the release of Flash Boys, which argued that faster firms could exploit slower investors.
However, industry participants argue that HFT firms play a necessary role in modern markets.
By acting as market makers, they provide liquidity by continuously offering to buy and sell assets. This function becomes particularly important during periods of market stress.
Potter emphasised that without these participants, market spreads could widen significantly, increasing transaction costs for all investors.
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The Arms Race Has No Clear End
Despite the rapid progress in trading technology, the competition is far from over.
The transition from nanoseconds to picoseconds represents another step in an ongoing cycle of innovation. Each improvement raises the bar for competitors and increases the cost of staying relevant.
At the same time, risks are building.
The reliance on increasingly complex infrastructure introduces vulnerabilities, particularly as geopolitical tensions affect global supply chains and communication networks.
What It Means for Investors
For most investors, the impact of high-frequency trading is indirect but significant.
Faster markets tend to be more liquid and efficient, but they can also react more sharply to new information.
The dominance of machine-driven trading means that price movements can occur faster than ever, leaving little room for delayed reactions.
The key takeaway is simple.
Markets are no longer driven by who has the best idea. They are increasingly driven by who can act on information first.
And in that race, the difference between winning and losing may now be measured in trillionths of a second.