(WEB HOST INDUSTRY REVIEW) — With financial market firms investing an average of $1.8 billion annually on data centers including space, power and cooling, these companies have major concerns over location, connectivity, flexibility and security when selecting financial data centers, however, power remains their overriding concern.
Based on interviews with front-office staff and technologists at brokers, trading firms, execution venues and IT solution providers, capital market research firm the TABB Group (www.tabbgroup.com) has published its research this week in a report entitled, “Financial Services Data Centers: Power, Proximity and Profit.” TABB found that two-thirds of the current US equity trading volume is driven by fewer than one percent of the firms deploying ultra low latency strategies that require being physically located within feet of an execution venue matching engine.
While ultra low latency is a basic requirement to operate such a business, 82 percent of firms reported that power was their primary concern, surpassing connectivity and cost. For instance, financial services data centers alone are the largest users of power in New Jersey.
“Once hidden only in basements of downtown Manhattan buildings and staffed with people in ripped jeans and sneakers, today’s data centers contain some of the world’s most bleeding-edge technology, run by some of the industry’s best and brightest,” TABB senior analyst and author the report Kevin McPartland said in a statement. “These centers house the heart of nearly every financial services business. From high-speed trading to derivatives pricing, the soaring need for compute power has made data center space the virtual replacement of Wall Street.”
The 21-page TABB research report outlines the importance of data centers for financial services firms, reviews different approaches taken by data center providers, provides a blueprint for firms looking to chose data center space best suited to their trading requirements, and presents an overview of vendors offering data centers products and servers. As McPartland notes, however, it is not just power that creates a winning financial industry data center.
“Except for a dozen or so firms at the top of the low-latency trading world, very few have a correctly optimized infrastructure to benefit from such close proximity to an execution venue’s matching engine,” McPartland said.
