Deutsche Borse Turns to U.K.'s Colt for Hosting and Access
February 26, 2007
London-based Colt, which has a data center near Deutsche Borse in Frankfurt, will provide the exchange's customers with a facility that can host order management and algorithmic trading systems, taking advantage of the proximity. The data center will be connected directly to Deutsche Borse via Colt fiber optic lines.
Sang Lee, co-founder and managing partner of Boston-based research firm Aite Group, notes that the automated trading trend accentuates the "the need for low-latency data and trade execution. As a result, we should expect to see many deals like this for all of the major execution venues."
Deutsche Borse has had a similar arrangement in place with data center specialist IXEurope since last August, says an exchange spokesperson. IXEurope provides proximity services from connections to Deutsche Borse execution venues and market data streams, to application hosting and remote system management.
A spokesperson for Deutsche Borse says that the proximity services and other system upgrades are in response to, among other developments, "the tremendous growth in algorithmic and automated trading and the rising demand for un-netted' data with more order depth."
The spokesperson says the exchange held negotiations with a number of candidates and chose Colt in part because of its location--"within kilometers" to minimize latency. Terry Quigley, head of the financial services sector at Colt, says it differs from other vendors in that it has its own lines. "We own the fiber from end to end," he points out, which is better for "guarantee[ing] the service level agreement, and there is no single point of failure."
Colt started out in the early 1990s by laying a fiber optic network around the City of London. It has since built 14 data centers across Europe, with connectivity into 20 exchanges and hosting facilities for seven of them.
Ian Jack, business manager of Colt's financial services division, says that although there is a lot of hype surrounding the algorithmic trading trend, most banks simply want a data center that is near an exchange and managed services. "We just went where the banks were," he says. He also notes that Colt is the only telecommunications firm with a pan-European footprint, using its own network rather than relying upon contracts and relationships with other, regional providers.
Extranet Alternatives
Other servicers--BT Radianz, Transaction Network Services and Savvis--are active in financial industry applications and collocation by way of secure extranets. BT Radianz, for example, has packaged the Radianz Proximity service, built around hosting facilities in place in eight market centers: New York, Chicago, London, Paris, Frankfurt, Singapore, Honk Kong and Tokyo.
Mark Akass, CTO of the BT Group unit in New York, says that such a global solution makes sense, especially in light of upcoming regulations like Europe's Markets in Financial Instruments Directive. "Broker-dealers are creating new venues and new sources of liquidity, which means the buy side has to be able to connect to multiple venues," he says.
