FOREX TECHNOLOGY
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equities trading firm decides to migrate its trading strategy into FX, it can utilize the services already provided within our financial services ecosystems. Te multi-tenanted, network-neutral data centre flourishes because the customer ecosystems within them are far larger and far more diverse than those in exchange and network-owned facilities. In essence Equinix has a marketplace, an open platform which enables firms to do business with each other, as part of a machine to machine (M2M) e-commerce environment,” says Manicom.
Equinix’s data centres contain an ecosystem of FX market participants, including ICAP’s EBS platform, Currenex and HotSpot, which has helped pioneer algorithmic trading in FX.
Customers can cross-connect to different trading platforms at an Equinix data centre within 24 hours, utilizing direct connectivity to matching engines or access nodes. Local cross-connects within an Equinix data centre to an execution venue’s matching engine or access node support high-speed data transfer of 1 Gbps or 10Gbps at fixed monthly rates.
Diverse facilities
A key benefit for FX market participants in installing co-location and proximity hosting services in a carrier- neutral data centre also lies in the diverse range of inbound and outbound connectivity options available. Hirander Misra, an independent e-trading consultant points out that FX trading firms based in carrier- neutral data centres can leverage its global network. For example, a firm may be co-located next to the matching engine of a major FX platform in Asia and have proximity hosting services next to the matching engines of the platforms’ major hubs in other regions, ensuring that it can execute low-latency trading strategies 24-hours a day.
“Because there are pockets of liquidity. Some of these firms that are really latency sensitive and have to be as close as possible to these key pockets of liquidity and equally the FX venues are generally in neutral data centers,” says Misra.
Manicom of Equinix points out that a reverse trend is also taking place, where trading venues relocate services in other jurisdictions as means of expanding trading volumes and countering the threat of greater competition. “One trend since the end of last year is a lot of these trading venues are looking outside their domestic market because their liquidity is being challenged by other alternative trading venues stealing flow,” he says.
Equity market blueprint
Manicom points to an emerging trend in the equities markets which could provide a blueprint for how FX platforms and trading venues augment their offering in the future, through the use of proximity hosting and co-location services. Te Australian Securities Exchange (ASX) in Sydney, in response to the growing competitive threat from Chi-X Australia, has installed a trading node at Equinix’s Chicago data centre campus to offer Chicago-based banks and proprietary trading firms access to Australian stocks.
Hirander Misra
“In FX there is a reliance on bank pools. Execution can be a lot slower than equities. Banks don’t like guys [hedge funds and HFT firms] picking them off and then arbing them on platforms such as EBS,”
114 | january 2012 e-FOREX
In a similar move, FX trading platforms such as EBS are setting up points of presence (POP) nodes in different locations to provide high-speed connectivity points to wider variety of market participants. “A PoP can be attractive to participants desiring simplicity and not wanting different contractual relationships with managed service providers. Smaller firms in particular may access the local POP with
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