Co-location: moving with the times
As advances in technology lead to a huge rise in electronic algorithmic trading volumes,
latency and the distance to networks become critical factors for buyers and sellers alike,
which is why increasing numbers of firms are opting for co-located data centre service
provision, as Interxion Group’s Anthony Foy explains to Steve Coomber.
The move to colocation facilities has
been accelerated by a number of
key developments in recent years.
These include the introduction of the Markets
in Financial Instruments Directive in the
European Union, and also market deregulation,
both of which have led to greater competition
and fragmentation of markets.
At the same time there has been an
increase in new start-up exchanges, offering
greater trading capacity in terms of volume
and liquidity, and in doing so challenging the
dominance of well-established incumbents.
Unsurprisingly, this has been accompanied
by a rise in automated electronic trading.
And in algorithmic trading, time really does
cost money, lots of it. Whether it is being
done in dark or public liquidity pools there is
a cost attached to a slower transaction.
‘Over the past three years we’ve gone
from less than 2% of trading taking place
in the electronic environment to 25%, and
the forecast is that in the next two years
50% of all trading will be electronic,’ says
MD of Interxion Group Anthony Foy. ‘This
has led to an increased reliance on data
centres that offer low latency virtual trading
environments, and which have to a large
extent now replaced the old trading floors.’
Fortunately, Interxion offers a solution for
the financial services industry in this area,
notes Foy. The firm operates a number of
Financial Hubs, located in secure and highly
connected physical environments within the
company’s data centres.
‘We started off with a focus on London,
Frankfurt, Paris, and Amsterdam, key
financial centres across Europe. We have
also located in Zurich and Stockholm,
and are rolling out to other locations.
We operate 25 data centres in 13 cities,
situated in 11 countries, at present.’
So in London, for example, Interxion’s
London Financial Hub provides the lowest
latency access to Europe’s top two trading
venues as well as providing colocation
services for Quote MTF and PLUS Markets,
and can also provide low latency access to
a raft of other markets including multilateral
trading facilities BATS Europe, Nasdaq OMX
Europe, and Turquoise.’
The firm even provides a test lab, with
dedicated cabinet space, in which customers
can optimise existing applications, develop
and test new products, and assess latency.
Making connections
Interxion’s financial hub concept is not just
about lowering latency, though, it is also
about adding value through a community
of highly-interconnected traders, brokers,
dealers, market data providers, networking
companies, and clearing houses.
‘This doesn’t just mean connecting
traders with venues. It covers the whole
range of service providers, including
specialist technical partners such as order
routing networks, smart order routers,
risk management, direct-feed handling
and infrastructure management service
providers,’ says Foy.
With such a reliance on technology,
organisations need to know they are
getting the best know-how, as well as the
operations management expertise that
ensures 24/7, 365-day availability for these
mission critical applications.
‘It’s a heavy industrial environment and
requires a lot of expertise in electrical
engineering, mechanical engineering, facilities
management, operations management, that
all goes towards the delivery of a service
level agreement that we have to provide to
the companies,’ notes Foy.
One thing is for sure, the move to
this type of financial hub is only going to
increase in the future.
‘Our financial hubs mirror the evolution
of computing infrastructure in other areas.
We are moving away from the client/
server environment to a more centralised
environment of very large server farms with
a lot of connectivity. It is a hub and spoke
approach to computing,’ says Hoy.
‘The challenge is to continue building these
communities and ecosystems created inside
our data centres. It is vital to provide a smooth
mechanism and environment for customers
to continue to access the services that they
require, in order to take full advantage of
the evolutionary trends taking place, both in
computing and financial trading.’ |
