The Chicago Board Options Exchange (CBOE) is opening the CBOE Futures Exchange (CFE) to European trading markets through exchange hosting and low-latency connectivity solutions at the Equinix LD4 co-location data centre situated to the west of London. Initial market data access and connectivity set up by managed service provider GuavaTech is live at LD4 and the CBOE says, without naming names, that another firm plans to set up connectivity to the CFE at LD4 this weekend, while a further half dozen firms are in the process of providing connectivity.
GuavaTech had the capacity to route required data to London before the CFE decided to expand its reach to hedge fund and equity market participants in Europe, but now has a formal agreement with the exchange to provide market data access and co-location services at LD4. These allow European traders to access all CFE quotes and trades, including spreads. To encourage trading, the CFE is providing low-cost entry through LD4 with fee waivers until the end of this year.
The decision to open a hub in London follows CBOE’s move to the Equinix NY4 data centre in Secaucus, New Jersey in April 2012. NY4 houses not only the CBOE, but also the CFE, C2 Options Exchange, the CBOE Stock Exchange and OneChicago, a joint venture of CBOE, CME Group and Interactive Brokers.
Latency for users accessing the CFE from LD4 is around 70 milliseconds round trip, with the CBOE’s decision to relocate all its matching engines from Chicago to NY4 taking up to 20 milliseconds off the round trip to Chicago and lowering the cost of long haul connectivity. Mike Beling, director of business development at GuavaTech, comments: “The need for low latency depends on strategies, but LD4 can be a viable solution for local equity traders when combined with a high-performance network such as ours. If strategies require ultra-low latency, the need is to be located alongside the matching engine at NY4.”
At GuavaTech, the LD4 connection is expected to support existing clients wanting to take advantage of the products CFE offers as well as add new clients in London, most probably a similar outcome to that sought by other connectivity providers setting up at LD4 to offer access to the CFE.
These are early days for connectivity and trading, but for the CFE, the LD4 connection is key to growth. CFE senior managing director James Lubin, explains: “This year we opened our London hub to support our expansion into Europe. Since then, we have been working to create new, high-speed ways for our customers to receive data and to trade the most comprehensive array of volatility products in the world.”
With European access coming onstream, the CFE’s next logical step is a move into Asia-Pacific. This is unlikely to happen in the short-term, but the connectivity providers offering access to the CFE from LD4 will no doubt be looking to replicate their work if, and when, the CFE seeks to extend its reach.