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BST DI Cover Next January 2012 Business Innovation Powered By Technology PLUS: The NYSE Invades Tokyo p.4 Competition Heats Up in Brazil As E-Trading Sizzles p.5 Interactive Map: Connecting The Liquidity Center Dots p.12 The Best Way to Regulate High-Frequency Trading p.14 Liquidity Centers Are Beginning to Look a lot Like Utility Centers p.18 In search of new revenue sources, the major exchanges are building out their own liquidity centers to offer capital markets firms a range of technology and services. p.7 Table of Contents p.2 Previous Next contents January 2012 COVER STORY 7 The New Profit Center In their search for new revenue sources, exchanges are building out liquidity centers that offer a full range of technology and services. PLUS: 12 Shifting Liquidity Flexible, Scalable, Neutral. Most equities trades on Wall Street actually flow Savvis Markets Infrastructure, Making Markets Work. through data centers in Northern New Jersey. WS&T maps the most prominent destinations. Leading financial services organizations across the globe rely on Savvis Markets Infrastructure as the foundation for their trading and IT solutions. • Savvis’ NJ2 data center in Weehawken, NJ hosts one of the top three consultant Wayne Arden UPFRONT 5 Brazil Still Sizzles US equity exchanges and six US equity dark pools, including three of 4 The NYSE Direct Edge plans to launch acknowledges. But strong the top five, representing 45% of average unlit daily volume Is Tokyo Bound an electronic trading competition may provide • The matching engines of three major global FX venues are located With the unveiling of its platform in Brazil, arguably the best market protection. within Savvis data centers, providing the lowest latency access new Tokyo liquidity center, the hottest emerging available to 43% of global spot FX average daily volume NYSE Technologies market in the world. PERSPECTIVES • Ultra low latency access points are available to a number of key promises high-speed access 18 A Matter of Utility exchanges and liquidity venues, across all asset classes to all of the major Tokyo INDUSTRY VOICE Liquidity centers will evolve • Access over 200 exchange feeds and a rich ecosystem of trading firms, markets through turnkey 14 The HFT Debate into utility centers for the applications and service providers focused on the financial markets trading, data and HFT firms need rules to equities markets, says Tabb For more information, call 1.800.SAVVIS.1 connectivity solutions. maintain a fair market, Group’s Adam Sussman. or visit www.savvis.com/financial. www.wallstreetandtech.com January 2012 2 © 2011 CenturyLink, Inc. All Rights Reserved. fromtheeditor Liquidity Rush ruth be told, data centers aren’t all From a capital markets perspective, it also has gies, the commercial technology arm of the ex- that exciting. The server rooms been interesting to watch data centers trans- change that runs part of the facility, aims to T largely are nondescript, dimly lit, form from standard hosting and colocation op- boost its revenues to $1 billion, a large portion extremely utilitarian and cold — both literally erations to multibillion-dollar, multifaceted of which will come from the company’s liquidity and aesthetically. businesses. Today, data centers have evolved centers (and the Capital Markets Community But the technology inside the buildings is into liquidity centers, and they have become Cloud Platform, the financial industry cloud of- another story. The technology continues to the focus for market participants across the fering that is housed in NYSE’s Mahwah facility). evolve at blinding speeds, with stages of tech- world. These modern facilities offer the latest NYSE Technologies is about half way to its goal, Greg MacSweeney, nological innovation often visible inside a sin- in data center technology and efficiency, while ending 2010 with $475 million in revenue. Editorial Director gle facility. Newer data centers are huge — also providing the fastest access to exchange CME Group also is moving to capitalize on @gmacsweeney typically 200,000 square feet or more — and matching engines, dark pools and ATSs. the liquidity center trend. As one of the world’s they often roll out in phases, which makes it Traditionally, data center providers such as leading derivatives marketplaces, it is opening possible to witness improvement from Phase Equinix, Savvis and Telx offered server colo- a 428,000-square-foot liquidity center outside 1 development to Phase 3 development. cation space. As more and more market par- Chicago in Q1 2012. Similar to NYSE, CME In Equinix’s facility in Secaucus, N.J., for in- ticipants have chosen to locate at particular Group says its facility will offer the lowest stance, the cooling vents in the first phase were facilities, however, they have become liquidity latency to its matching engines in addition to located close to the ceiling. In subsequent destinations, with increasingly scarce rack colocation and hosting space for its customers. phases, the vents were lowered just above the space. But now the traditional data center Where the liquidity center concept will lead server cabinets to blast cool air directly into the providers are facing new competition — from is anyone’s guess. But consider this: NYSE racks. While the change may not seem like a the exchanges (see page 7). Euronext “future built” its massive New Jersey huge technological advancement, it increases NYSE Euronext in 2010 opened a 400,000- facility by including extra space that it would cooling efficiency, something that is extremely square-foot data center in Mahwah, N.J., and al- not need right away. And yet, less than one important in an operation where cooling and ready has 76 percent occupancy for colocation year into the life of the liquidity center, it’s power comprise the No. 1 cost. services. Furthermore, by 2015, NYSE Technolo- more than three-quarters full. I www.wallstreetandtech.com January 2012 3 upfront Liquidity Access Rises in the East Drawing on its acquisition of Metabit, NYSE Technologies will provide access to liquidity in all major Tokyo markets through turnkey trading, data and connectivity applications. By Ivy Schmerken @ischmerken YSE Technologies officially intro- liquidity in the Asian markets as a driver behind maintaining a similar infrastructure themselves.” duced in December its new Tokyo liq- the facility. The company already has a foothold According to NYSE Technologies, customers Nuidity center, underscoring the global in Japan, including trading platform and data can access key Asian markets — including the demand for turnkey applications for trading, feed deployments; that foothold was strength- Tokyo Stock Exchange’s new Tdex+ derivatives data and connectivity. Citing the growth of ened in September 2011 with the company’s platform and arrownet cash equities network Asian markets, the company said in a statement acquisition of Metabit, a Tokyo-based provider — market data and other electronic trading in- that the NYSE Technologies Tokyo of market access products with a community frastructure services utilizing the NYSE’s Secure Liquidity Center would provide high- of more than 140 trading firms in Asia. Financial Transactions Infrastructure (SFTI) net- “With little to no hardware “In working with our customers to identify work. Each client installation, the company said, investment, ... we can have their primary trading needs and opportunities, will feature turnkey trading products that in- we found that Tokyo and the surrounding Asian clude connectivity, market data, order transmis- customers connected in markets were a very high priority,” NYSE Tech- sion and risk management services and support. just a few weeks.” nologies CEO Stanley Young said in the release. The Tokyo Liquidity Center also features many —Stanley Young, NYSE Technologies “Our Tokyo Liquidity Center addresses those of the infrastructure services, including the speed, high-reliability access to these needs ... with seamless connections to all major cloud-based Capital Markets Community Plat- markets with minimal infrastructure costs and Tokyo markets. With little to no hardware invest- form, that customers already use to access NYSE an acclerated time to market. ment or complicated maintenance, we can have Euronext’s global exchanges. It joins existing NYSE Technologies, the commercial technol- customers connected in just a few weeks as facilities in Mahwah, N.J., and outside London. ogy division of NYSE Euronext, pointed to in- compared to the challenging expense and Additional NYSE liquidity centers are scheduled creased trading activity and a consolidation of arduous process of designing, building and to open in Toronto and Brazil later this year. I www.wallstreetandtech.com January 2012 4 upfront CONSTRAINED BY Direct Edge Helps BUNDLED SERVICES? Heat Up Brazil DISCOVER Exchange will open an electronic platform THE FREEDOM in Brazil to compete with BM&F Bovespa for a share of the HFT market. TO INNOVATE Leverage competition among leading service providers inside By Melanie Rodier @mrodier Equinix and gain the agility and perspective you need to power revenue and growth. s high-frequency traders continue to push into AFFHVVOHDGLQJVHUYLFHSURYLGHUVZKRFRPSHWH emerging markets, Direct Edge, the N.J.-based stock IRU\RXUEXVLQHVV 'HYHORSLQQRYDWLYHVWUDWHJLHVWKDWOHYHUDJHPXOWLSOH exchange, announced plans to open a new electronic WUDGLQJYHQXHVDQGEHVWLQFODVVGDWD A DQGVHUYLFHSURYLGHUV platform in Brazil, arguably the hottest emerging market for ,QFUHDVHEDQGZLGWKDQGVSHHGZKLOHUHGXFLQJ
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