Low-latency traders not only need fast matching engines, but they also need the fastest networks and switches funneling messages to these venues. That is the premise of Zeptonics, a new trading technology firm based in Sydney, Australia that demonstrated its devices at the SIFMA Tech Leaders Forum and 2102 Exhibition this week.
On Wednesday, the firm announced Zeptolink, a network device that is able to electronically reconfigure network connections and replicate packets with minimal latency of around five nanoseconds — or about five one-billionths of a second. The company said this makes it ideal for ‘fan-out’ trading applications such as market data distribution and network monitoring, in which a packet is sent from one port to many ports.
Through the network device, one data source is replicated and funneled out to 50 ports, forwarding data within 5 nanoseconds. “That’s 200 times faster than a traditional switch that a broker or exchange (uses in a data center) where they use multicast,” said Dr. David Snowdon, a hardware principal at Zeptolink, who has a PhD in computer engineering. Snowdon was previously VP Systems Engineering at Zomojo, one of the largest high frequency trading firms in Sydney, For those firms that have co-located trading strategies in a data center, it removes the man in the middle, explained Snowdon. “If you have a colocated machine you are not allowed in during market hours,” he notes. With HFT strategies migrating to overseas markets, Instead of walking in, someone can unplug and re-plug in cables. Someone can add a new machine or connect a new market data feed. A lot of times a broker wants a button to cut the client off from the exchange, notes Snowdon. Instead they could use Zeptolink, and incur only five nanoseconds of latency.
But Snowdon says that Zeptolink has many purposes: Exchanges and brokers could use the Zeptolink to publish market data 100 times faster than through traditional data center switches. Using Zeptolink, Snowdon says, a broker can replicate market data to 2,500 clients with two ports and only 10 nanoseconds of latency. Trading firms and brokers could use it to send drop copies of orders to exchanges and to publish volatilities out to their clients.
According to Snowdon, Zeptonics started out by building the world’s fastest matching platform, Zeptomatch, which took about two microseconds. “Then we suddenly realized, if you have a number of networks it takes about two microseconds to get to an exchange, so the networks have to be much faster,” said Snowdon. Zeptonics was founded by Matt Hurd in 2011 who worked at Zomojo and started the firm along with a handful of ex-traders and experienced developers to develop network devices and other hardware and software solutions that he felt were missing from the low latency-trading world.
A few weeks ago, the company announced ZeptoMux, a 10 Gigabyte multiplexing switch (with 23 ports) designed to help brokerages funnel number of trade orders from multiple client lines to the exchange gateway with a latency of 130 nanoseconds. It takes competitors 500 nanoseconds to one microsecond to do the same thing, according to Snowdon.
Clients are currently testing the Zeptomux, while the Zeptolink will be available in late 2012, and is also undergoing beta testing in HFT firms and investment banks.