OpenMarkets

Co-location: Enhancing Markets Through Faster Access

Mar 27, 2012 || Craig Mohan || No Comments

The first time I entered the new CME Group co-location facility was to get a tour of the data center (seen in the above video) and sit in on a weekly construction meeting with about 60 people. Before that, I did not quite understand the true scale of this massive data center and the number of people involved.

I came into the project in 2010 with the task of building the co-location business, but this was the first time I became familiar with all I had to work with.

To give you some idea of the scale:

• The facility is 428,000 square feet, the equivalent of seven football fields.

• The building has its own substation capable of delivering 184 megawatts of power.

• 16 different service providers have space in the facility as part of our partner program.

• More than 100 customers are participating, in addition to 13 telecom providers.

These facts and figures highlight a long-standing focus on technology innovation at CME Group. But they – and the facility itself – also reflect the changing world of financial markets. According to TABB Group, financial firms spent about $15 billion on data centers in 2009.

Co-location is, as the name implies, the placing of two things, together. In our terms, it means placing customer systems in the same data center as Globex, our electronic trading platform. This provides the lowest latency connection possible. For a customer located in London, for example, placing their trading systems in our data center allows communication to and from Globex to take place much faster than both systems sending data back and forth from London.

In financial markets, slower connections can be the difference between making and losing money on a trade. And the difference between a fast and slow connection is microseconds.

As Kevin McPartland of TABB Group says in the above video, “every market participant needs to be close to the markets.” And it’s not just for speed. There’s also increased safety in co-location, and the cost-efficiencies involved allow companies to expand their reach globally.

That’s why there is high demand in our industry for co-location services, where not only are servers in the same building, but the fiber optic cables connecting each company’s network to the electronic trading platform are the same length.  In fact, since we launched co-location services on January 29, there are already over 100 customers trading this way on our markets. The practice has become so popular across the industry that many large firms have moved all of their activity to co-location.

We built our facility from the ground up for the purpose of offering the fastest possible access to any product trading on our electronic platform but the expanding presence and need for co-location is industry-wide. As McPartland states, more electronic trading means more interconnectivity, which “is going to require big growth in data center usage over time.”

This is indeed the future of trading.