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A-Team Insight Blogs

Will NYSE Mahwah Access Spur Latency Spend?

The decision by NYSE Euronext to open up access to its Mahwah, NJ data centre to third party co-location, and to adopt a more open connectivity policy is going to be welcome news for at least some trading firms seeking low latency, and vendors servicing them. But whether it will be the game changer it might once have been remains to be seen.

To date, the NYSE has only allowed member firms to co-locate within the Mahwah facility.  Its new policy will allow vendors to do likewise, which will especially benefit those providing market data and transaction services, allowing them to provide very low latency services to firms also co-located in the centre. It could also encourage providers of infrastructure services to take space in order to provide simplified, managed deployment for trading firms and vendors that don’t want to go the DIY route.

In terms of access to Mahwah from outside the building, to date, the only route available has been via the exchange’s SFTI network, which is accessed via a number of Points of Presence (PoPs). In the New York City and metro area, connectivity providers have laid fibre to hook into these PoPs as a means to provide access to NYSE’s market data and trading services.

Now – or rather in Q1 2013 once its ‘meet me’ telco room is built –  NYSE is allowing access to Mahwah via other telecom services. Already, Cross River Fiber has said it plans introduce new “Express Direct” connectivity to link Mahwah to New Jersey data centres in Carteret (Verizon/Nasdaq), Secaucus (Equinix) and Weehawken (Savvis).

Express Direct will presumably chop some propagation latency from those interconnects (compared to routing via a SFTI PoP), and could prove attractive to firms with trading strategies that take in NYSE’s markets and those provided by Nasdaq/PHLX, Direct Edge, Bats, and a number of other liquidity pools hosted by Equinix and Savvis.

The question, though, is how many customers will pay a premium for lower latency access.  In the days of the “low-latency arms race” (just a couple of years ago), the “spend what it takes to reduce latency” mentality would have assured a huge take up for such services. But now with an increased focus on costs and ROI, firms will likely carefully weigh the advantages of spending more for faster access. Those engaged in arbitrage and market making are likely to be takers, since latency is extremely important to their strategies, whereas those providing DMA services and routing client orders, will probably think hard about such an investment.

The NYSE says it will also – in Q3 – provide similar access across the pond to its Basildon data centre just outside of London, though a number of vendors – such as Colt, MarketPrizm and CQG – have already made announcements that they are connected directly into and are operating co-lo from that facility.

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