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— Blog

Datacenter Needs of the Financial Sector: Moving Beyond High Frequency Trading

Farhan Khan
May 15, 2014

The financial sector made the news recently with the release of Flash Boys: A Wall Street Revolt by Michael Lewis. In his new book, Lewis makes mention of high-frequency trading (HFT), a technique which “uses proprietary trading strategies carried out by computers to move in and out of positions in seconds or fractions of a second.”

Michael Lewis’ book and 60 Minutes’ interview not only highlighted the HFT world, but also demonstrated the importance that datacenters play with those traders. In fact, without the ability to colocate in close proximity to financial exchange matching engines, high frequency trading’s competitive advantage would likely be crippled.

Though the focus of the book and interview was on HFT, the importance of datacenters to the financial world extends beyond high frequency trading. Though milliseconds down to nanoseconds matters in the HFT world, it becomes less important for other network and datacenter requirements. Below are some other examples of how datacenters play a crucial role in supporting the financial market’s technology needs.

  • Backbone Network Nodes:

With the amount of traffic the large financial institutions push globally, coming up with an effective network architecture strategy has become paramount from a cost reduction, resiliency, and performance perspective. For this reason, many of the large financial firms have copied the network provider model of colocating with ‘carrier hotels’ dense with fiber and provider options. This approach allows the firms to choose from hundreds of carriers to ensure 100% uptime while reducing overall costs, due to the competitive environment inherently created in an interconnection facility.

  • Distribution Nodes for Market Data Providers:

For the same reasons financial firms have moved their network nodes into carrier rich datacenters, market data providers have realized the benefits of placing their distribution nodes within the carrier hotels/interconnection facilities. By colocating their distribution nodes in interconnection facilities, these providers have access to every provider and their on-net building list, allowing for diverse options to reach their end clients whether they sit in enterprise datacenters, office buildings, or even to their home residences.

  • Corporate IT Platforms:

Like any other corporation, financial institutions need to place their mission critical applications in a secure facility with the infrastructure necessary to guarantee 100% uptime. Network options become less important for this need, while requirements for locations outside of 500-year floodplains, Tier III hardened infrastructure, impenetrable security, and geographical diversity for business continuity/disaster recovery become the focal points. This need became even more apparent when Super Storm Sandy underlined the vulnerability of many datacenters located within Manhattan that went dark for days.

Understanding these varying applications, Telx has built facilities that addresses all the above. Whether it be interconnection rich facilities like 111 8th Ave, or 350 E Cermak to address the network and distribution nodes or Tier III facilities outside of the 500yr floodplain like NJR3, Telx’s facilities are built to support the financial sector’s end-to-end needs.