Is Proximity Hosting an Elderly Concept?

Is proximity trading in colocation centers the equivalent of having faster runners between booths on the stock exchange floor?

Recent controversies about some types of high frequency trading have raised the broader question about whether there should be limits on the ability to use technology to provide speedier access to trading data. This discussion has also boosted interest in proximity trading, which offers traders the ability to lease rack space close to the financial exchanges' servers, has been a major growth business for several colocation providers.

The concept is nothing new, according to Direct Edge CEO William O'Brien, who notes that the same principles once led trading firms on the NYSE floor to seek the best locations for their booths so that their order-ferrying runners wouldn't have to run as far - allowing them to execute trades more quickly than those in more distance booths. O'Brien shared his views Wednesday night in a roundtable on low-latency trading and colocation hosted by the Aite Group. See Wall Street & Technology for more details.

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