Exchanges

12:20 PM
Ivy Schmerken
Ivy Schmerken
Commentary
Connect Directly
Facebook
Google+
Twitter
RSS
E-Mail
50%
50%

Cha Ching! The Sound of Colocation Fees

A regulatory filing by NYSE Arca offers a glimpse into NYSE Euronext's plans to allow vendors into its Mahwah data center, and what it will charge them for hosting applications per user in the colocation facility.

As exchanges look to generate more revenues from colocation services provided in their liquidity centers, NYSE Euronext took steps to expand the scope of users of its colocation services in its Mahwah, New Jersey data center.

A regulatory filing dated Oct. 26, 20011 provides insight into NYSE Euronext’s plans to open up the Mahwah data center to third party application providers. The filing notifies the SEC of a proposed rule change by NYSE Arca, one of three U.S. equities matching engines housed in the Mahwah data center.

On October 11, 2011, NYSE Arca filed a notice with the Securities and Exchange Commission requesting to expand the scope of users for colocation services in its Mahwah data center, to include vendors. Previously, the only users of colocation services were electronic trading permit (ETP) holders and sponsored participants. But under the proposed rule change, users could include non-ETP Holder broker-dealers and vendors.

“The exchange anticipates that the potential additional users would provide, for example, hosting, service bureau, technical support, risk management, order routing and market data delivery services to customers while the user is co-located in the Exchange’s data center.”

In the filing, NYSE Arca also proposes to amend its fees for colocation since the vendors would provide hosting for hosted user inside the colocation facility. From the filing, the exchange proposes to charge a fee of $500 per month for each hosted user (end customer) that the user (vendor) hosts in the exchange’s data centers. This sounds like the vendor will need to pay $500 per month for each user they are hosting in the colo facility. Beyond this, the vendors would charge their customers fees (set independently) which the exchange would not share in.

While the filing has some confusing language around the terms User and Hosted User, it defines "hosting"as supporting the end user's technology, either hardware or software in the user's co-location space. Evidently, vendors will need to pay to be in the colocation space and naturally, end users (presumably brokers, market makers, and hedge funds and possibly, buy side firms sponsored by member firms), will pay fees to the vendors as well as to the data center for renting colocation space.

One can quickly see how colocation is shaping up to be a lucrative business for exchanges.

Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio
Comment  | 
Print  | 
More Insights
More Commentary
Bankrolling Technical Debt: A Financierís Guide
Technical debt represents the effort required to fix source code or application problems that put the business at risk.
Staying Ahead of the Game With Continuous Delivery
The need to develop better software faster is leading financial organizations to continuous delivery (CD), a practice pioneered by SaaS companies like Salesforce.
Shore Up Cyber Security Now
Knowing that a data breach can and will happen at some point, asset management firms can manage new operational and regulatory risk with a layered approach to cyber security.
Is Big Data a Problem or an Opportunity?
When it comes to data, financial services firms are, as a rule, quite circumspect. They fear cyberattacks, data theft, data loss, security breaches, data privacy, and human error.
Data Integrity: A Necessity, Not an Option
Financial institutions that have taken on the data integrity task in the past now have to spend more money on hardware, software, and people just to keep up with the demand.
Register for Wall Street & Technology Newsletters
White Papers
Current Issue
Wall Street & Technology - July 2014
In addition to regular audits, the SEC will start to scrutinize the cyber-security preparedness of market participants.
Video
Exclusive: Inside the GETCO Execution Services Trading Floor
Exclusive: Inside the GETCO Execution Services Trading Floor
Advanced Trading takes you on an exclusive tour of the New York trading floor of GETCO Execution Services, the solutions arm of GETCO.