NYSE Euronext began trading stocks at its New Jersey trading hub today, kicking off a new era in which the company's technology platform becomes the focus of its exchange operations. NYSE Euronext (NYX) has spent months preparing to transfer trading to its 400,000 square foot data center in Mahwah, New Jersey.
While the change won't be noticeable to stock traders or investors, it's a significant moment for the growing market for low-latency trading. The NYSE Euronext data center is home to the exchange's new matching engines - servers that match buy and sell orders and provide updated pricing information. This morning the NYSE shifted trading in a small number of stocks from matching engines in New York to ones in Mahwah.
Colocation Space Sold Out
The new data center features colocation space for trading firms seeking high-speed access to the matching engines. NYSE EuroNext says it has sold out all the available colocation space in its first phase at Mahwah - reported to be at least two 20,000 square foot pods. Three additional pods are planned as expansion space, for a total of 100,000 square feet of colocation space.
The need to execute a trade a microsecond ahead of rivals has created an arms race in ultra-low latency colocation, and is reshaping the playing field in the trading industry. NYSE Euronext expects its New Jersey data center, and a similar facility in Basildon, England to house ecosystems of hedge funds and trading firms eager to conduct trades in microseconds. NASDAQ OMX Group is also expanding its colocation space in New Jersey.
Securities analysts have been keenly interested in whether the exchanges' new data centers will disrupt the status quo for providers like Savvis, Equinix and Switch and Data, which have invested heavily in large data centers. Thus far market entry of the NYSE doesn't appear to have been hugely disruptive to the colocation business in North Jersey.
Not 'All or Nothing'
"There was a slight movement of customers that were looking to move from our center into the new one," said Bill Fathers, Senior Vice President of Savvis, which operates high-frequency trading data centers in Weehawken. "In reality, what happened is most of our customers decided to deploy an additional set of infrastructure in the NYSE Euronext facility, and still keep their infrastructure in our facility because it’s where there are several dozens of other trading venues that they trade on. So it’s not an all or nothing proposition."
That need for diversity is the primary counter-balance to the NYSE Euronext's claims of advantages in speed. Building its own data center has allowed the NYSE to customize its infrastructure for blazing fast 100 gigbit per second connectivity.
But even as the new data center transforms its business, NYSE Euronext is trying to build reminders of its low-tech beginnings into the landscape of its high-tech trading hub. The grounds of the building feature six buttonwood trees, providing a reminder of the buttonwood tree on Wall Street under which 24 brokers formed the New York Stock Exchange in 1792.