High-speed traders are feuding over a way to save 3.2 billionths of a second

The controversy is about an arcane technical maneuver in which high-speed traders bombard Frankfurt-based Eurex with useless data. The idea is to keep their connections to the exchange warm so they can react fractionally faster to market-moving information.

The battle is the latest chapter in a decadeslong contest among secretive ultrafast trading firms, which have pursued a relentless quest for minuscule speed advantages.

A group of high-frequency trading firms has exploited the practice to rake in hundreds of millions of dollars, says Mosaic Finance, a French firm that has complained to Eurex and European regulators.

“An arms race is OK, but you must use legal weapons," said Hugues Morin, founder of Mosaic.

Eurex says Mosaic’s claims are baseless. At the same time, it recently announced a systems upgrade that is likely to curtail the technique, which other market participants see as falling into a regulatory gray area.

Morin says Mosaic had a thriving high-speed trading business on Eurex until 2022, when its profits suddenly plunged 90%. The Paris-based firm initially couldn’t explain the collapse. After numerous tests, it concluded that rivals were blasting Eurex with bad data to get a tiny but consistent speed edge.

In a complaint filed earlier this month, Mosaic urged the European Commission to investigate Eurex for encouraging the “unfair" practice and allowing a small oligopoly of firms to dominate high-frequency trading on the exchange, according to a copy of the filing reviewed by The Wall Street Journal.

Mosaic claimed that trading firms have made up to 600 million euros, the equivalent of nearly $700 million, by using the maneuver over the past three years, while Eurex has boosted sales by charging such firms for fast data connections.

Eurex, part of Germany’s Deutsche Börse, said it enforces its rules and has tools to detect malformed data.

“The allegations from this individual trading participant are unfounded, and all substantive concerns raised have been repeatedly reviewed by Eurex. None of the issues raised proved to have merit," a Eurex spokeswoman said. The European Commission declined to comment.

Back in the 2000s, trading firms invested in networks of microwave antennas to zip data more quickly between exchanges, along routes joining hubs such as Chicago and New York. That yielded speed improvements measured in milliseconds—or thousandths of a second.

Now, the battle involves nanoseconds, six orders of magnitude faster. A nanosecond is the time it takes for light to travel about one foot. Obtaining such an edge often involves tiny hacks to optimize automated trading systems.

High-speed traders often seek to capture fleeting differences between prices of related assets, making quick response times critical.

If benchmark Euro Stoxx 50 index futures rise, for example, contracts tied to Germany’s DAX will usually follow. A first mover will be able to buy DAX futures before they tick higher, then sell out at a higher price—a strategy that can add up to big profits over time.

The maneuver that prompted Mosaic’s spat with Eurex can improve reaction times by about 3.2 nanoseconds, according to the French firm, which calls it “corrupted speculative triggering," or CST for short.

The technique helps because orders on Eurex are encoded into packets, or small bursts of ones and zeros. Under the rules of the Ethernet protocol—widely used in computer networks—each packet starts with a preamble, signaling data is on the way. The real message, such as a buy or sell order, comes later.

A trading firm can save a few nanoseconds by sending the preamble first, before knowing if it wants to trade. If it gets information that makes it want to buy or sell, it can quickly embed its order into the rest of the packet. If it decides to do nothing, the firm can send an empty or deliberately garbled packet to Eurex.

Optiver, a Netherlands-based global trading firm, has also engaged in strategies similar to what Mosaic described, people familiar with the matter said. An Optiver spokesman declined to comment.

Emergent Trading, a small firm in Chicago, also uses a version of the technique to gain several nanoseconds of speed edge on Eurex, said founder Brandon Richardson. He said there is nothing wrong with the technique. It is well-known among high-speed traders and other firms can use it too, he said.

Still, he described cat-and-mouse games with Eurex. He said the exchange once upgraded its monitoring tools, identified what Emergent was doing and told the firm to stop—while other variants of the technique employed by other traders continued to work.

“They could detect my trick, but not other people’s tricks," Richardson said.

The battleground could soon shift again. On Dec. 8, Eurex announced an overhaul to its monitoring system and other technical changes set to take effect in April, which some traders say could largely end CST. Still, there is little doubt that high-speed traders will keep searching for other ways to get even faster.

Write to Alexander Osipovich at alexo@wsj.com