High Frequency Trading and the NYSE’s Data Center in Mahwah,NJ

In the spirit of David’s post,I thought I would add a little more color on high frequency trading and the NYSE.  Since it seems that any reputable reporter discloses all possible conflicts when writing about a topic (not that I’m a reporter),I should note that Grubb &Ellis manages the NYSE’s new data center in Mahwah,NJ.

Here are some facts on that facility that are not well known (but I should note that they’re not confidential):

Trading began in Mahwah in August,effectively moving the hub of the financial markets from New York City,to New Jersey.   The total facility which was built-to-suit for the NYSE is about 400,000 sf.  Of that,there is a total of about 100,000 sf of  ”white space”divided into five 20,000 sf  ”pods.”Three of these pods are built-out,and the remaining two are planned for future expansion.

As the 60 minutes report noted,high frequency trading is a large driver in the New York metro area,as financial users seek incredibly low latency to market “matching engines.” Since the NYSE provides colocation space in their facility,the latency for high frequency traders is unmatched (no pun intended).  The NYSE is charging $950-$1,000 per kw per month for colocation space,nearly four times the going rate for colocation space in New Jersey and double the most expensive colocation facility in New Jersey -Equinix in Secaucus (which also caters to high-frequency traders). Additionally,the NYSE charges users for additional services that only it can offer,such as connection to SFTI (Secure Financial Transaction Infrastructure),RMG (Risk Management Gateway) and SuperFeed,a connection to major US markets through a managed service.

Since a millisecond advantage in trading applications can be worth over $100 million a year to a brokerage firm (See article below -Business at Light Speed),this is a small price to pay.  According to the NYSE,round trip latency to matching engines for colocation users in the Mahwah facility is 75 microseconds.  The NYSE keeps this latency consistent throughout the facility by running the same length of wire to every rack in the building regardless of the physical location of the rack.  This keeps trading firms from fighting over where their servers are located in relation to the matching engines.

Another interesting piece of trivia . . . The NYSE does not allow carriers into the building.  In order to connect to the NYSE you must first connect to the SFTI network in one of the buildings where SFTI is located,like 111 Eighth Avenue,32 Avenue of the Americas,165 Halsey,and a few others.

Fore more on high frequency trading,here are some interesting articles:

Business at Light Speed

Trading Places

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