Wall Street Centers Drive Computer Trading

In the high-speed world of computerized stock trading, a fraction of a second can mean the difference between a good trade and a bad trade. It's a high-speed, high-stakes game in which Wall Street firms are competing for every extra millisecond of speed in their data networks, with data centers as the battleground.

Information Week provides a revealing look into this niche in its article titled Business at Light Speed. "A 1-millisecond advantage in trading applications can be worth $100 million a year to a major brokerage firm, by one estimate," the story notes. One of the prime beneficiaries in the bid to reduce data latency has been SAVVIS Communications (SVVS), which offers "direct market access" trading from its data center in Weehawken, immediately across the Hudson River. The other big winners are the exchanges themselves, who have become significant players in the financial colocation business:

Both the NASDAQ and NYSE are undergoing data center consolidations that will create a consistent high-speed performance for all colo clients.

Information Week also looks at new players in the ultrafast trading business. While the trend certainly places a premium on data center services, its benefits are tightly focused on New York area data centers that can provide the closest geographical proximity to the exchanges and their trading systems.

There was an interesting panel on the topic at the ETech confernece in San Diego last month, in which Peter Bloom of General Atlantic Partners and economist Bill Janeway shared their insight into "Trading 2.0" strategies and spoke at length about the advantages possible through high-speed trade execution.

In the post-session blogging, an alternate take on high-speed trading was shared by venture capitalist Paul Kedrosky, who also spoke at ETech's panel on data center investment. Paul writes: