COLOCATION AND THE ART OF RAPID-EXECUTION TRADING. Examining Low Latency, Colocation and Proximity Hosting

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1 COLOCATION AND THE ART OF RAPID-EXECUTION TRADING Examining Low Latency, Colocation and Proximity Hosting This fourth report in our low-latency series goes beyond the technology that underpins trading. No matter how your architecture is optimized, you can t beat the speed of light and an important aspect of minimizing latency is reducing the distance from your trading engine to an exchange s matching engine. ICE INFRASTRUCTURE Analyzing the Business of Enterprise IT Innovation COMPUTING FOR THE ENTERPRISE 4 FINDINGS Low-latency trading is a major driver for colocation. PAGE 4 Ultralow latency is meaningless. PAGE 5 Neutrality is good for choice, and value-added services provide better integration but can conflict with neutrality. PAGE 16 Some of the major exchanges want to own everything. PAGE 14 5 IMPLICATIONS Carrier hotels play an important role in support of financial markets. PAGE 6 NYSE Euronext s new facilities in London and New Jersey will impact the industry. PAGE 14 Networking companies are paying much more attention to point-to-point latency performance. PAGE 22 The delivery of low-latency market data in colocation facilities is of increasing importance. PAGE 24 The market for interparty latency products is growing. PAGE 26 1 BOTTOM LINE You can t be colocated with every trading venue, so proximity and connectivity are as important as colocation. OCTOBER 2009

2 REPORT SNAPSHOT TITLE Colocation and the Art of Rapid-Execution Trading ANALYST RELEASE DATE October 2009 LENGTH John Barr, Research Director, Financial Markets and Head of EU Research 48 pages ABOUT THIS REPORT The desirability of a residential property is said to be determined by three issues: location, location and location. As the push to ever-lower latency for market data and trading continues to grow, it has been suggested that the three most important issues for the delivery of a financial service are colocation, colocation and colocation. In this report, we explore the reality behind this proposition. If there were no requirement for low latency in financial markets, there would be no colocation opportunity. This report explains why latency is an issue, why colocation is an opportunity, and who colocates where. It examines wholesale and retail colocation and proximity datacenters that support the major financial markets in the New York metro area, Chicago, London, Paris and Frankfurt. The report covers financial exchanges, datacenter providers and connectivity vendors, as well as a cross-section of value-added technology and financial services companies all in the context of colocation. It identifies the major datacenter facilities at the heart of financial markets, consolidates and explains the limited amount of latency information available, and provides maps that aid in understanding where a critical mass of financial activity is building in different geographies.

3 TABLE OF CONTENTS SECTION 1: EXECUTIVE SUMMARY KEY FINDINGS METHODOLOGY GLOSSARY OF TERMS SECTION 2: INTRODUCTION LOW LATENCY COLOCATION CLASSES OF MARKET PARTICIPANT Figure 1: Colocation Facilities Providers Figure 2: How Datacenter Space Is Sold Carrier Hotels Figure 3: Carrier Hotels Interconnection Facilities Options for Outsourcing Datacenter Services SECTION 3: MARKET PARTICIPANTS EXCHANGES AND TRADING VENUES DATACENTERS Figure 4: Network Map BT C4L Colt Telecom CoreSite Digital Realty Trust Equinix Global Switch Interxion Level 3 Communications Savvis Switch and Data COLOCATION AND THE ART OF RAPID-EXECUTION TRADING

4 TelecityGroup Telehouse Telx CONNECTIVITY Figure 5: Connectivity Options Atrium Networks Exponential-e Hudson Fiber Network Xasax MARKET DATA Activ Financial Exegy SpryWare LATENCY MONITORING Correlix Figure 6: Interparty LAtency Corvil TS-Associates OTHER COLOCATED SERVICES Ticks Essex Radez Fidessa Fixnetix QuantHouse SECTION 4: MAJOR FINANCIAL CENTERS LONDON Figure 7: London Datacenter Facilities PARIS Figure 8: Paris Datacenter Facilities FRANKFURT Figure 9: Frankfurt Datacenter Facilities

5 4.4 NEW YORK/NEW JERSEY Figure 10: New York-Area Datacenter Facilities CHICAGO Figure 11: Chicago Datacenter Facilities SECTION 5: LATENCY NUMBERS BETWEEN FINANCIAL CENTERS Figure 12: Reported One-Way Latencies Between Major Financial Centers LONDON Figure 13: Reported One-Way Latencies Between Datacenters in the London Area NEW YORK Figure 14: Reported One-Way Latencies Between Datacenters in the New York Area SECTION 6: DATACENTER MAPS LONDON PARIS FRANKFURT NEW YORK CHICAGO SECTION 7: THE 451 TAKE 47 INDEX OF COMPANIES 49 COLOCATION AND THE ART OF RAPID-EXECUTION TRADING

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