Wednesday, October 19, 2011

The Quest For Speed and The Exchange Gateway To Asia

The Race To Zero: Asia
Singapore SGX has commited US$250m to its low latency cause, as algo trading spurs investment in data center infrastructure around the world. SGX details its reach
Published by Ambrose McNevin

One of the key topics of concern for brokers and traders wishing to have high-speed access to trading engines is location – or “just how physically close can you get me to the trading platform”.

In London, with its multiple exchanges, the issue is around staying inside its M25 ring road. Go any further than that trading platform and the milliseconds start to build up and you find yourself stuck in the slow lane.

In New York, the answer is not to be any further than North New Jersey where there is a large concentration of data centers including the Verizon site that hosts Nasdaq and the Mahwah data center built and owned by NYSE Euronext.

In Singapore, there are no such worries about far-flung locations. Being on an island measuring just 10km x 40km means that wherever you locate you can never be that far away from the trading engine.

For the Singapore Stock Exchange (SGX), its US$250m investment in an ultra-low latency trading platform called Reach is about locating in an ultra modern data center with super-fast connectivity to Tokyo, Chicago, New York and London.

Bob Caisley, CIO at the Singapore Stock Exchange, says he believes he is building the fastest trading engine in the world. “Reach is about having the fastest trading engine in the world, at the best data center in Asia with the best colocation facilities,” he says.

Like all trading engines, Caisley acknowledges there may be other trading platforms which will outpace his, but for now, his will be the fastest with an order response time of 90 microseconds.

This quest for speed is behind the exchange’s US$250m investment in Tier IV data center infrastructure which is scheduled for commission at the end of Q1 2011. The fit out is currently underway and SGX believes it can attract algo traders not only for its international derivatives business but its cash equities business which it sees as having huge growth potential for high frequency trading and making Singapore “the exchange gateway to Asia”.

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