Ecosystems for Success - a report from Kapronasia sponsored by ASX

The advent of electronic trading in the 1980s in the United States introduced a new era of algorithmic or high frequency trading (HFT) whereby firms tried to get their trading applications as close as possible to an exchange’s matching engine to lower latency and speed up trade execution. By the 2000s, the exchanges were moving their matching engines into colocation data centres, where they were joined by the HFTs that would find no better substitute to being colocated in the same building as the matching engine itself. Today, it is no longer all about speed, and the belief that it is only HFTs that are in exchange colos could not be further from the truth.

Published: Jul 2021

Report Description

Open ecosystem exchange-operated data centres like the ASX’s Australian Liquidity Centre (ALC) in Sydney are actively helping their diverse community of clients to “reduce costs, complexity, and risk, while empowering them with agility and increased opportunities for partnership. It is these open exchange colocation centres that provide real value to their customers and are leading the way as a beacon for their peers to follow. By contrast, closed exchange-colos try to block off competition by barring other exchanges, dark pools, or carrier networks from their facility. In attempting to increase their slice of the market, they may ultimately be hurting the growth and expansion of these markets. In this report we look at the emergence of exchange colocation facilities, the value they offer, and their different models of operation, with various exchanges featuring as case studies.

 

Ecosystems for Success - a report from Kapronasia sponsored by ASX Report Details

  • Number of Pages: 27
  • Number of Tables & Charts:

Table of Contents

  • Executive Summary
  • Key Findings
  • Methodology
  • The Rise of Exchange Colocation Facilities
  • The Importance of an Open Ecosystem
  • Case Studies
  • Conclusion: A Look to the Future