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About eight months ago, Australian low-latency networking equipment provider Zeptonics, made a hit at SIFMA Tech Leadership Forum and Expo with the announcement of its new 50-port low-latency Layer-1 ZeptoLink networking device.

Everything seemed rosy for the trading appliance start-up until the Australian Federal Court ruled on a tort brought against Zeptonics by fellow-Australian low-latency trading and networking equipment provider Zomojo.

In its decision issued this week, the Federal Court of Australia has ordered Zeptonics cease all use of its ZeptoLink, Zepto Access KRX, ZeptoNIC and ZeptoMatch offerings and turn them over to Zomojo.

All existing third-parties using or testing vendor’s ZeptoLink and ZeptoAccess offerings, which include about half of the top global proprietary-trading firms, also are under order by the Australian court “to not facilitate directly or indirectly their use.”

The basis of Zomojo’s tort is that while Zeptonics founder Matt Hurd was a co-managing director and head of the its R&D team between 2005 to early 2011, he used knowledge gained from his position to develop and market high-speed trading devices beginning in 2010 when he founded Zeptonics. Other complaints made in the same lawsuit include breach of fiduciary responsibility to disclose business opportunities presented to Zomojo and soliciting Zomojo employees during their restraint periods.

According to an official statement from Zeptonics, its products are the result of starting from a clean slate and two years of “inventiveness and hard work of a talented team of more than twenty people” and millions of dollars in investment.

However, the company will comply with the court order, but believes that it has “substantial ground for appeal,” the statement adds.



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Earlier this week, one of the Technology Advisory Committee (TAC) working committees presented the US Commodities Futures Trading Commission (CFTC) a proposed four-point definition of high-frequency trading.

It’s important to remember that this definition is nothing more than a recommendation to the CFTC. As CFTC Commissioner Scott O’Malia stated publicly in the past, the working group’s definition will be the straw-man definition that will spur industry discussion and lead to an eventual regulatory definition.

According to the working group members, their goal was to keep the definition broad enough to capture any future practices within the existing definition and avoid narrow language that might lead to regulatory arbitrage.

Given the rise of high frequency trading has forced more firms to focus on market data and trade messaging latency as well as algorithmic execution like never before, how do you know whether your strategy would be considered high frequency trading under the proposed rule?

Here is definition as the working group presented it to the CFTC:


High frequency trading is a form of automated trading that employs:    

(a) algorithms for decision making, order initiation, generation, routing, or execution, for each individual transaction without human direction;

(b) low-latency technology that is designed to minimize response time, including proximity and co-location services;

(c) high-speed connections to markets for order entry; and

(d) high message rates (orders, quotes or cancellations).


Most people in the industry would agree that all four points accurately describe high frequency trading, but it still leaves the regulators and the industry the challenge of turning a subjective concept into an objective definition. What qualifies as low latency technology, high-speed connections and high message rates?

Any fixed figure would be outdated almost immediately, which leaves regulators using fixed ratios to define high frequency trading. Yet the management, documentation and reporting of staying between those regulatory lines would be prohibitive to all but the largest firms with the deepest IT pockets.

The TAC has managed to grab the low-hanging fruit with its recommendation, now the hard work really begins.

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Although most of my discussions during this week’s SIFMA Tech Leadership Forum and Expo center around middle- and back-office operations, I had a quick meeting with Australian network equipment provider Zeptonics, which announced the second its 50-port low-latency Layer-1 ZeptoLink networking device, which can be paired with its 24-port 10 Gbps Ethernet layer-2 ZeptoMux multiplexing switch that it announced a few weeks ago

According to David Snowdon, a hardware principal at Zeptonics, high-performance layer-2 switches offer similar performance whether the traffic is “fanning up” from multiple links into a single exchange link or “fanning down” from an exchange link to multiple consumers.

To address fanning-up performance, Zeptonics built the ZeptoMux using FPGAs that provides a reported fibre-to-fibre latency of about 130 nanoseconds.

To improve the fanning-down performance, the company decided to use ASICs rather than FPGAs in the ZepoLink and bit streaming rather than packet streaming, which delivers a latency of approximately 5 nanosecond.  The ZepoLink also acts as an intelligent patch panel allowing multiple 1-to-1 and 1-to-n connection within the same device.

Zeptonics should have 50 ZeptoMux units to beta clients in the coming weeks and plans to deliver ZeptoLink units to beta users sometime in the third quarter.


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Now that financial technologists are discussing measuring latencies in the hundreds of nanoseconds, it is time to discuss how fast firms need to be in this market and whether there are any alternatives. In the latest episode of the Daly Post Podcast, I ask these and many more questions to Hyannis Port ResearchCEO and low-latency veteran Tony Amicangioli.

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If you happen to be in New York on April 25th, please stop in to The After the Bell Forum at The Westin Times Square after work. I’ll be moderating the first panel discussion on technology and automation for successful trading.  Please check it out and stay for the second panel on connectivity, co-location, big data and news-based trading as well as the post-panel networking session.

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