Fixnetix, Equinix See Partnership Positives in Connectivity and Low-Latency

As trading speeds continue to increase across capital markets, a pairing between a technology provider and a datacenter operator would seem to be a natural fit. As Equinix and Fixnetix have discovered, the combination of co-location and connectivity has brought benefits to both firms.

"Particularly around the HFT space, we've had the requirement to move our applications as close to the exchange matching engines as possible," explains Alasdair Moore, founder and business development director at Fixnetix. "Equinix has been very successful in attracting a number of matching engines and liquidity pools into their datacenters globally. What that's meant is that we've had a relationship with them purely based on our customer requirements." With growth in areas that Fixnetix serves, such as the high-speed and latency-sensitive traders, that relationship has been extended, particularly with the company eyeing an expansion to the east. Fixnetix has already signed a deal for co-location services with the Hong Kong Stock Exchange, but their partner company also plays into that strategy.

"Shortly, we're going to be expanding into Asia, where we're looking to continue that partnership as well, and we fully expect to be deploying into their Asian datacenters," he says.

Outside Interests
Fixnetix's recent public success has been best emphasized by the fact that NYSE Technologies, the technical division of the east-coast exchange company, has acquired a 25 percent stake in the company with an option to buy more in the future. NYSE Technologies, of course, operates its own datacenters, but Moore doesn't see this part-acquisition as being problematic for the future of the company's relationship with Equinix.

"It's difficult to see [what effect there would be]," he says. "NYSE itself has interests and points-of-presence beyond their own datacenters. What I would say is that Fixnetix's business model is to have a distributed architecture, and NYSE's model is to have a centralized architecture based around their exchanges. While we have a 25 percent investment from NYSE, we don't see that affecting our relationship with Equinix at all. We have a large number of cabinets within Equinix, and we're constantly acquiring more as we're growing."

If you take the equities markets, traditionally people would have done 100 percent of their equity business on the London Stock Exchange, say. Now, as markets are fragmented, you need to access four or five liquidity pools to gain a complete picture of the transactions that occur for a UK stock.

Robin Manicom, director of financial services for EMEA at Equinix, agrees with this sentiment, saying that although there is an element of rivalry between his company and NYSE Tech, it's not the overriding flavour of their interaction.

"Even before the announcement with NYSE and Fixnetix, we've been doing very supportive business with NYSE around the world," he says. "We have a number of access nodes to their network in our datacenters, because NYSE would like to use Equinix as a facilitator for them to reach other parts of the market where they don't have datacenters. So yes, there's a NYSE datacenter in Basildon, UK and also in Mahwah, NJ, and to some degree, there's a little bit of competition there at the database and co-location level, but I would say it's a very small part of our overall relationship. Well over 90 percent of our relationship with NYSE is collaborative and on a partnership basis."

Spider Web
For Fixnetix, the high-speed environment is crucially important to their customer base. Locating as close to the exchanges as possible is a competitive differentiator for their clients, but connectivity to different venues has also become critical in an era of fragmented liquidity.

"In today's environment, an organization is very rarely transacting on one venue," says Moore. "If you take the equities markets, traditionally people would have done 100 percent of their equity business on the London Stock Exchange, say. Now, as markets are fragmented, you need to access four or five liquidity pools to gain a complete picture of the transactions that occur for a UK stock." With high-profile markets such as Chi-X located in Equinix's datacenters, BATS moving to their facilities, and connectivity to order books such as Turquoise, just in the UK, this idea of a network becomes understandably mission-critical. By reflection, Fixnetix's global low-latency connection to other venues provides an attractive benefit for Equinix's customers, also.

"Where Fixnetix really comes in and helps us is when a customer also needs to access trading venues outside of our datacenters in London, parts of Europe and the US," says Manicom. "Fixnetix really can provide an end-to-end solution where it can provide the co-location management, but at the same time, it can also hook the customer up onto its global financial network, which is high speed and low-latency to get them the reach into the other trading venues in the quickest possible time."

Light Speed
The partnership is expected to grow, both say, not just in Asia but with the access to new technologies that companies such as Fixnetix can provide. Their field-programmable gate array (FPGA) team, for instance, is now larger than their C++ team, and their consistent investment in upgrading their infrastructures allows for a continually-expanding edge.

"We have a constantly evolving infrastructure, where we're continuing to invest in it by upgrading switches, circuits and this FPGA technology which wasn't practical until recently," says Moore. "We're beginning to deploy that, which means that round-trip times can really become sub-10 microseconds."

The Bottom Line
- Although ultra-low-latency is a highly-specialized field, the level of expertise required to fully exploit technological development, along with a trend to outsourcing, means that partnerships between technology providers and datacenter operators are a logical step.
- The Equinix and Fixnetix partnership is symbiotic in many ways - while Equinix provides the physical datacenter base and co-located access to the matching engines that reside within them, Fixnetix can provide a connectivity network to enable cross-venue activity from a single location.
- As recent announcements from Fixnetix and Equinix, as well as other network providers such as BT have proven, connectivity is becoming as important as speed in modern markets.