Nasdaq Offers Deep Discounts on Co-Locating Order Engines
January 14, 2013
Competition to have trading firms locate their order engines under the same roofs as exchanges’ matching engines has ratcheted up with Nasdaq OMX’s announcement that it is offering a discounts of up to 50 percent for new “co-located” cabinets ordered in the first quarter of this year.
Price cuts for co-location services at the Nasdaq OMX Carteret, N.J., data center will range from 38% on monthly recurring costs for Super Cabs to 50 percent monthly recurring savings for low- and medium-density cabinets. Nasdaq defines density as the amount of power needed to power and cool cabinets.
Nasdaq's cabinet rates:
Low Density $4,000 $2,000 50%
Medium Density $5.000 $2,500 50%
Medium-high Density $6,000 $3,500 42%
High Density $7,000 $4,500 36%
Super Cab $13,000 $8,000 38%
“They’re offering a sale for new cabinets and trying to lure more people in,” says Alexander Tabb, a partner with the Tabb Group. “And once they get them in, they’re not going anywhere.”
Nasdaq has also made a number of significant moves in upgrading its co-location services. It now provides 10 gigabit a second and 40 gigabit a second Ethernet access to all Nasdaq OMX markets at the Carteret center. The exchange operator has beefed up its pre-trade risk management capabilities with, for example, its purchase of the Smarts Group, a market surveillance systems provider.
”There’s a lot more concern about risk and security among a clients than there was a year or so ago,” says Ted Myerson, Global Head of Access Services at Nasdaq OMX.
Access Services generates $200 million annually, Myerson says.
Nasdaq is offering co-location as part of its Access Services business which also includes front end risk management, compliance tools, reporting tools, post trade regulatory proceeds, finger printing and FinQloud.
A new cloud computing platform, Nasdaq announced in late September, Finqloud is powered by Amazon Web Services and designed exclusively for the financial services community, to store regulatory and compliance information “in the cloud.”
The strategy: create as much leverage and synergy among the components of the digital ecosystem as possible.
The Nasdaq discount announcement comes as N YSE Euronext has been doing some fee adjustments of its own. In late June, the New York Stock Exchange asked the Securities and Exchange Commission to approve a new fee schedule so that network providers and vendors could acquire data center space and offer their services to customers using the NYSE data center in Mahwah, N.J.
The fees were based on cross connects ranging in price from $1,500 a month for six cross connects to $3,900 a month for 24 cross connects. Additionally all customers were to pay a $500 annual fee.
“Cross connects are very big business,” says Alex Tabb.
It also wanted fees for users who purchased a cage with several cabinets in the data center. Prices here ranged from a $5000 initial charge plus $2,700 a month for 1 to 14 cabinets and $5,000 initial charge plus $5,500 a month for 29 plus cabinets.
$5,000 initial charge plus $2,700 monthly charge
$10,000 initial charge plus $4,100 monthly charge
$15,000 initial charge plus $5,500 monthly charge
On August 15 the SEC approved NYSE’s proposed rule change and price increases, enabling the exchange to charge the same $500 connection fee for installing either a single cross connection or a bundled cross connection, “because the cost to the Exchange is generally equivalent.” The SEC also let NYSE bolster costs contingent on cage size and the number of cabinets contained in each.
According to the ruling, the NYSE could also charge customers for staff overtime at the Mahwah facility to prove 24/7 client response. Additionally, the SEC gave NYSE a green light to allow a user who purchase five 10 gigabit connections to only be charged the initial fee for a sixth. The user would not be charged the monthly fee that would otherwise be applicable.
"The Exchange is offering additional co-location services as a convenience to users,” the SEC noted.
NYSE Euronext declined to respond to requests for interviews regarding this story.
Neither Direct Edge or BATS offer co-location offers co-location facilities. “BATS does not offer co-location ourselves. We are within the Savvis datacenter and Savvis offers co-location services that members can acquire,” says Suzanne O’Halloran, a BATSZ spokeperson. “So everything is between the member and Savvis.”