Stock exchange latency dictating datacentre market

The appetite for low latency connections to financial markets is driving demand for co-location space within stock exchange datacentres, a financial technology consultancy has said.

Speaking at the DatacentreDynamics conference in London on Tuesday, James Dow, chief technology officer for financial technology consultants CS Technology, said: "The world of the exchanges is changing. They are doing some interesting things and what they are doing is having an impact across the datacentre community... latency management is driving massive dislocation into the market today".

He explained that as more and more exchanges offer co-location space within their datacentre, like the LSE, companies that place a premium on low latency, such as high-frequency trading firms (HFT), will be tempted out of their existing datacentres.

This threatens companies that provide datacentre space for companies in the finance sector, such as UK firm Interxion, said Dow."Whether the exchange does it [co-location] or not, that absolutely threatens Interxion’s type of market," he said.

However, Dow differentiated between financial customers, noting that only a few would need the low latency and market-specificity afforded by exchange co-location. Other customers, such as multi-market traders, would be more likely to use their own datacentres or ones provided by companies such as Interxion.