Network costs plague Asian bourses

SINGAPORE--Stock exchanges in Asia are opening up the floodgates to allow foreign companies to trade on their systems, but are increasingly hampered by network and connectivity costs to cope with the transactional growth, according to an Equinix executive.

Key to the growth of bourses in the region is the ability of each exchange's network to connect to other exchanges in the world, John Knuff, Equinix's general manager for global financial markets, said Thursday in an interview.

Speaking with ZDNet Asia on the sidelines of the FIA (Futures Industry Association) Asia Derivatives Conference 2009 held here, Knuff noted that storage and server costs have gone down steadily through Moore's Law. In contrast, however, network costs have been escalating due to surging transaction volumes and the need for greater connections.

"As you trade electronically, you need networks that branch out in all parts of the world, and the message per second volume and megabit per second volume drives those network costs up," he explained.

To keep costs down, exchanges need to "get in the middle of all those networks"--a premise that Equinix offers through its co-location facilities that act as a hub for different networks, said Knuff. "In the world of trading, that's where you want your trading infrastructure to be--where you can have access to as many networks as possible," he noted.

Equinix data centers, including a new facility in Singapore, host 34 exchanges and trading platforms globally, most of which are located in North America and Europe. The Tokyo Financial Exchange and Tokyo Commodities Exchange are among the company's Asian customers. Equinix is also working with the Hong Kong Mercantile Exchange to deploy its platform in a live environment.

Despite the global economic downturn, financial markets have observed a "nearly triple-digit growth" in transaction volumes aided by the rise in electronic trading, said Knuff.