Automated Trading Software

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Category: Trading

High-frequency trading by Wall Street firms has been a growth driver for data center providers in northern New Jersey, including Equinox (EQIX), Switch and Data (SDXC), Savvis (SVVS), Digital Realty Trust (DLR) and Telx, who have leased space in their facilities to hedge funds and trading firms. These companies have created lucrative "ecosystems" of participants in the low-latency automated trading markets.

Much of the growth has come from the trading operations at a relatively small number of firms who require the fastest possible connections. But in a discussion of the prospects for low latency collocation at a panel Tuesday in Clifton, NJ, market participants and analysts said the demand for these services is likely to broaden. Data center providers are likely to see growing demand from smaller hedge funds and trading firms, even as the largest players in the game chase continue to focus on “feeds and speeds.”

Analyst Kevin McFarland from TABB Group said there are about 200 firms in the ultra-low latency market that will continue to focus on trading performance. But he also believes the low-latency colon market will see growth from a second tier of trading companies that will max out the space or power in their on-premises server rooms and IT closets. Companies in New York offices may find it particularly difficult to find additional power or room.

“The reason you’re seeing companies move to these new facilities is power,” said Daniel Marques, the chief technology officer of Ballista Securities, which runs an alternative trading system (ATS) for options traders. ”The reason these (collocation) providers succeed is that they can say ‘we can bring you all the power you need.’”