Is Wall Street Still Investing in its Data Centers?

Are financial firms continuing to refresh their data center hardware? Do container data centers or renewable energy fit into Wall Street’s plans for technology infrastructure? Those were among the topics explored at the recent Waters Power conference in New York City. The event was organized by Waters Online, which tracks technology in the securities industry. In this video, Waters news editor Emily Fraser talks to Tabb Group’s Kevin McPartland, who summarizes the discussion from a panel he moderated on new data center technologies. This video runs about 4 minutes, 30 seconds.

For more news on Wall Street data center infrastructure, see our Low Latency Channel. For additional video, visit our DCK video archive and the Data Center Videos channel on YouTube.

More Data Center Deals for Financial Players

The U.S. financial sector has been hit hard by the economic crisis, but financial companies continue to acquire more data center space for trading and asset management applications. Here’s a summary of two deals announced yesterday:

• Global asset managment firm Neuberger Berman has leased space from Digital Realty Trust (DLR) for a “large data center” in the northeastern United States. “This Data Center will be a key element of Neuberger Berman’s IT infrastructure, supporting advanced applications that will enable us to continue to serve our customers while growing each segment of our business as an independent asset management firm,” said Paul Metzger, Senior Vice President for Information Technology at Neuberger Berman. “This space enables us to pursue an accelerated timeline for our datacenter project because it is ready to move into immediately with all of the security, redundant power and technical specifications to support and protect our IT systems.”
• QuantHouse announced that it has expanded its operations within Switch and Data’s 111 8th Avenue site in New York, which serves the company’s QuantHouse’s QuantFEED application programming interface (API), which provides sub-millisecond access to market data. “Proximity to the U.S. equities markets is essential to QuantHouse, and being strategically colocated near the major market centers gives us the ability to offer low-latency market data services to our customers,” said Stephane Leroy, Head of Global Sales and Marketing at QuantHouse, a leading provider of ultra low-latency market data and trading solutions.

Wall Street: $1.8B A Year on Data Centers

U.S. financial firms are investing an average of $1.8 billion annually on data center space, power and cooling, according to new research from TABB Group. That investment is transforming the nature of Wall Street trading, according to TABB, which says that more than 66 percent of the current US equity trading volume is driven by fewer than 1 percent of the firms deploying ultra low-latency strategies that place their servers within feet of an electronic exchange in data centers.

“These centers house the heart of nearly every financial services business,” says Kevin McPartland, senior analyst and TABB and author of the new research report. “From high-speed trading to derivatives pricing, the soaring need for compute power has made data center space the virtual replacement of Wall Street.”

McPartland writes that although data centers will remain the realm of engineers, the front office has grown acutely aware of their importance, along rising power bills required to run cutting-edge hardware. Eighty two percent of industry insiders interviewed ranked power as their most pressing concern, surpassing connectivity and cost.

Wall Street Eyes Hardware Acceleration

Hardware acceleration is gaining traction as a tool for speeding up trading analytics and market data, according to Ivy Schmerken at Wall Street & Technology, who summarizes some of the discussion at last week’s Accelerating Wall Street event in New York. Financial firms continue to seek ways to wring extra microseconds of performance out of their low latency trading operations, but are in the early stages of adoption on hardware acceleration.

Hardware acceleration addresses computationally-intensive software processes that task the CPU, incorporating special-purpose hardware such as a graphics processing unit (GPUs) or field programmable gate array (FPGA) to shift parallel software functions to the hardware level. That’s a very basic description; James Hamilton recently wrote at length about these concepts.

Why is hardware acceleration important? One quote from Thursday’s event will be of interest to data center providers with financial clients. “The value proposition is not just to sustain speed at peak but also a reduction in rack space at the data center,” Adam Honore, senior analyst at Aite Group, told WS&T. Depending on the specific application, Honore said a hardware appliance can reduce the amount of rack space by 10-to-1 or 20-to-1in certain market data and some options events. Thus, a trend that bears watching for data center providers.

Switch and Data Targets Financial Services

Switch and Data (SDXC) is leveraging its network of data center peering facilities to seek a larger foothold in the lucrative world of low-latency financial trading. Switch and Data, which operates more than 30 colocation centers, has launched a financial services practice to provide high-speed access to electronic trading exchanges in the equity, options, futures and currency markets. The move is the latest reminder that although Wall Street is downsizing, financial companies continue to invest in algorithmic trading - and that means infrastructure.

“Regulatory changes and fragmented liquidity have driven an explosion of market data volume and the need for highly secure data center space,” said John Panzica, Vice President of Switch and Data’s Financial Services unit. “Switch and Data’s new practice understands this demand and helps customers develop custom solutions to meet their ever-growing low-latency connectivity, space and power needs in North America’s leading financial centers.”

The market for low-latency trading continues to attract investment, but Switch and Data will find itself battling for business with multiple rivals with established business powering trading operations, including Equinix (EQIX), Savvis Communications (SVVS), Telehouse, Telx, DataPipe and CRG West.

Telx Keeps Growing at 111 8th Avenue

Interconnection and colo specialist Telx continues to expand its data center footprint. Today the company announced that it has taken an additional 14,000 square feet of space at 111 8th Avenue, the huge carrier hotel in lower Manhattan where Telx already operates several facilities.

The new space will house the Telx Financial Xchange, which offers financial customers access to low latency connections to other networks. With more space in 111 8th Avenue, Telx can accommodate growing demand for financial “cross-connects” as well as basic colocation.

Telx also said it is partnering with ACTIV Financial to offer low-latency market data and colo services to the financial industry. The availability of data feeds is a key step in attracting trading operations and building a financial ecosystem within a data center. Customers can now place their corporate trading platforms right next to ACTIV’s ticker plant, accessing low-latency global market data from a single connection.

360TCS Data Center Targets Financial Niche

360 Technical Center Solutions (360TCS) has opened a new data center in Lombard, Ill. and is focusing on providing high-density data center space to Chicago-area financial firms. The facility has opened with an anchor tenant in Wolverine Trading, a Chicago trading specialist that’s also an equity investor in 360TCS.

At 8,000 square feet, 360TCS is a relatively small facility, and will be built out in two phases. “We have a unique niche target market,” said Don Welbourn, Director of Sales for 360TCS. “We are not focusing on selling large contiguous footprints. This facility will appeal to a specific type of client. With the center’s high density capabilities, equipment that would occupy 10 or more cabinets in most facilities can be compressed in to three or four.”

The growth of low latency trading has boosted business for providers like Equinix (EQIX) and Savvis (SVVS) in the New York and Chicago markets. Wolverine provides technology solutions for high-performance trading, including real-time market data feeds that enable algorithmic trading. The availability of these data feeds is a key step in attracting trading operations and building a financial ecosystem within a data center.

Wall Street Still Expanding in Low Latency Trading

Despite the credit crunch and stock market meltdown, Wall Street continues to invest in mission-critical IT infrastructure, especially data center space to support low latency trading. Two leading providers of advanced trading systems, Dow Jones and RTS Realtime Systems, said today that they have added infrastructure in data centers operated by Equinix Inc. (EQIX).

RTS Realtime Systems said it has expended its operations at two Equinix facilities, the Chicago-3 data center in Elk Grove Village, Ill. and the New York-4 site in Secaucus, New Jersey. RTS offers high-speed low latency market access to more than 40 global equities, options and futures markets via its network of data centers in the U.S., Europe and Asia.

Dow Jones & Co. said it has deployed infrastructure in the Equinix Chicago-1 data center to extend the reach of its algorithmic trading products to its customers via the low latency financial ecosystem in Equinix Chicago data hubs.