According to research from TABB Group in a new report, Financial Services Data Centers: Power, Proximity and Profit, 66% of the current US equity trading volume is driven by fewer than 1% of the firms deploying ultra low latency strategies that physically require being located within feet of an execution venue matching engine.
Based on interviews with front-office staff and technologists at bulge bracket broker-dealers, proprietary trading firms, execution venues and IT solution providers, the TABB research 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 pinpoints vendors offering data centers products and servers.
Although data centers will remain the realm of engineers, the front office has grown acutely aware of their importance, forced to recognize the impact of the worlds changing politics and economics, specifically how cutting-edge hardware requires considerable electricity to run. Multiply that need, says Kevin McPartland, senior analyst at TABB and author of the IT research report, by tens of thousands of servers used in any given data center, which explains why 82% of those interviewed ranked power as their most pressing concern, surpassing connectivity and cost.
The TABB report covers data center business models, third-party product and service solutions, power density, carrier density, security and proximity. For this last point, Kevin McPartland explains that the trading engine needs to be optimized, market data must by gathered with the least latency possible and the hardware this runs on must be perfectly suited for the task. 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 venues matching engine.
In the not-so-distant future, the shared services facility business model will move beyond common power, heating and cooling into the area of cloud computing where firms can rent CPU cycles and memory-on-demand. McPartland refers to this as Data Center 3.0.
Once hidden only in basements of downtown Manhattan buildings and staffed with people in ripped jeans and sneakers, todays data centers contain some of the worlds most bleeding-edge technology, run by some of the industrys best and brightest, says Kevin McPartland, senior analyst and author of the IT research report, TABB.
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.
There is a certain brand of Feng Shui that can be applied to a data center, says Adam Sussman, director of research, TABB. The needs of the client determine where the cages should be located, how they are designed and the amount of power supplied. Data Center 3.0 is about adapting to the changing needs of their clients.
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