Opening Cross: The ’Center of the Data Universe

The old chestnut is Equinix’s CH4 datacenter at 350 East Cermak Road in Chicago, which in the last week has seen a flurry of activity—especially around access to Nasdaq-owned Treasury bond platform eSpeed. Both network provider CFN Services and Nasdaq will make eSpeed data available in the datacenter, to make it faster, easier, and cheaper for Chicago-based traders to trade eSpeed’s cash bond market against Treasury futures contracts listed on CME Group.

CFN will make the data available via its Alpha Platform managed data infrastructure and its UltraFast Market Data microwave network both to 350 East Cermak, where CME Group maintains a point of presence for access to its markets, and to CME’s own co-location center in Aurora, Illinois, where the exchange hosts the bulk of its technology. Meanwhile, Nasdaq is creating a point of presence at 350 East Cermak for access to data from eSpeed and the exchange’s other equities and options markets, as well as a disaster recovery site to replace eSpeed’s existing DR site in Rochelle Park, NJ—30 miles from Nasdaq’s main datacenter in Carteret, NJ. By providing fiber connectivity between NJ and Chicago leased from third-party network providers, Nasdaq will eliminate the need for Chicago firms to lease their own primary and backup lines.

The focus on CH4 creates an interesting dynamic between vendor-operated co-lo/proximity hosting centers and exchange-owned facilities, such as CME’s Aurora site or the New York Stock Exchange’s datacenter in Mahwah, NJ. Before the construction of CME’s Aurora facility, CH4 was the place to be in Chicago, offering cross-connect access to just about anything. But when Aurora went live, those requiring lowest-latency connectivity to CME took space in the new co-lo center. Now, with fewer firms willing to make the investment required to achieve ultra-low latency, might we see some settle for being “fast enough” in CH4, and perhaps see greater consolidation around these exchange-neutral sites, in the same way that Equinix’s NY4 datacenter has become the de facto liquidity center for New York trading (to the extent that Equinix built its NY5 site right next door to add extra capacity to the site)? Or as in Tokyo, where to meet demand for more capacity, Equinix now plans a fifth datacenter in the city, close to its existing TY3 datacenter.

Until the trend fully plays out, we’re likely to see a trend of hybrid strategies, where market participants take space in both types of center until a clear tipping point emerges. For example, while the Australian Securities Exchange has just set up a point of presence in CME’s co-location center to make it easier for North American firms to access its markets, some vendors are hedging their bets by setting up shop in both facilities. Low-latency data and trading infrastructure provider Fixnetix has just announced plans to offer co-located IT services in 350 East Cermak in addition to its existing presence in CME Group’s Aurora facility, while the Continuum infrastructure business of Denver, Colo.-based data, analytics and trading technology vendor CQG has begun making data from the Tokyo Commodity Exchange available to traders hosted in both datacenters, using the same format as CME data.

Much as the advent of low-latency algorithmic trading prompted firms to move trading and data infrastructures into third-party datacenters, it may take another seismic shift in trading practices to decide which model will be successful in the future. Until then, exchanges and datacenter providers will just have to share the limelight.