The race for speed: When a microsecond is worth gold

For you, a stock market order goes out in a second, and that is very fast. For some players, a second is an eternity.

They count in microseconds. A millionth of a second. The blink of an eye is more than one hundred thousand microseconds.

They are called high-frequency traders. Computers that buy and sell thousands of times a second.

Their idea: earn very little, but very often. A cent here, a cent there, millions of times.

For the example: a share is worth ten euros in one place, ten euros and one cent in another. You buy and resell one thousand shares.

Ten euros of gain. Nothing at all. But repeat it ten thousand times in the day: one hundred thousand euros.

The secret is to get there first. Whoever sees the price move before the others pockets the gap.

So a race began. Not a race of ideas: a race of cables.

First battleground: colocation. You rent space for your computers inside the exchange's own building.

In the app, this chapter is animated and narrated, card by card. Start free trial.

In a fibre, light takes about five nanoseconds per metre. One metre less of cable is already an advantage.

So much so that some exchanges give everyone the same length of cable, coiled if needed, so nobody is closer.

Second battleground: distance. Between Chicago and New York, two marketplaces watching each other constantly.

Around two thousand ten, a company had a cable dug almost in a straight line, through the Appalachians.

Hundreds of millions of dollars, to gain a few thousandths of a second. And places on that cable were rented at a high price.

Then others beat that cable with microwave antennas. Through the air, waves travel faster than light in glass.

In two thousand fourteen, the journalist Michael Lewis told the story of this race in a book: Flash Boys.

His thesis: the fastest see your orders coming and jump ahead of you. The market would be rigged by speed.

The book caused a scandal. Others answer that these robots narrow spreads, and lower costs for small savers.

The debate is not settled. But it had one concrete consequence.

A new exchange, IEX, installed a speed bump: three hundred and fifty microseconds of coiled cable, for everyone.

Slowing down on purpose to make the race pointless. A simple idea, in a world that only thought about speeding up.

For you, this race changes almost nothing. You will never win on speed. And you do not need to.

A saver who holds investments for years does not care about a microsecond. Their own advantage is the long run.