Proximity Hosting: When Microseconds Matter

A second may seem like an instant to you and me. But in the world of low-latency trading, a second is an eternity. Wall Street firms using computerized algorithmic trading measure success in milliseconds and microseconds, which is how long it takes to connect to exchange systems to execute a trade. A microsecond is one-millionth of a second.

Savvis (SVVS) sees those microseconds as a huge area of opportunity as it seeks to build its hosting of low-latency trading applications. The St. Louis-based managed hosting provider, which has a long history in the financial services industry, is ramping up services to capitalize on rising trading volume on electronic financial exchanges.

"Every exchange has seen huge growth, which creates more trades and more bandwidth demand," said Varghese Thomas, the vice president for the financial markets vertical at Savvis. "The bandwidth rates are going up and up. That's why we have a huge push to have much more of a focus on the financial sector."

The key to Savvis' ambitions is a huge data center in Weehawken, New Jersey, which houses servers for five major exchanges, including the American Stock Exchange, Philadelphia Stock Exchange, and BATS Trading.

"This is the crown jewel of our data centers at Savvis," said Thomas. "The clients are all high-end financials and hedge funds. We have a waiting list now for clients who want to be in here."

That high-value client list is reflected in tight security, including an array of access restrictions using passkeys, several types of biometrics (including hand scanners and facial recognition) and man-trap corridors.

Savvis has several existing competitors in the low-latency trading business, including BT Radianz, Transaction Network Services (TSN) and Yipes. Thomas says he believes Savvis has a sharper focus on hosting expertise than its rivals, which has helped it gain more exchanges as clients.

"A lot of the exchanges don't want to be in the colocation business," Thomas noted. "Even BT doesn't focus on the hosting. They offer it because their customers need it. At Savvis, hosting is in our DNA."

Savvis has developed a suite of services offering tiers of financial services and feeds. One new service is Exchange Express, which offers high-speed Ethernet connections to financial exchanges hosted in New York and in northern New Jersey data centers in Jersey City, Secaucus and Carteret.

Then there's Proximity Hosting, Savvis' "ultra-low latency" offering, in which customer equipment is located adjacent to the exchanges' servers within the Weehawken data center, eliminating any lag created by distance.

Thomas says the hosting service has become popular with hedge funds, which may not be able to afford their own data center but still require low-latency access for quotes and executing trades. Proximity Hosting clients can connect to exchange servers within 64 microseconds.

Savvis now has 30 data centers with more than 1.3 million square feet of raised floor space, in which it hosts 5,000 clients. It has grown rapidly this year, opening four new data centers in Atlanta, northern Virginia, New Jersey and Silicon Valley. It just announced new data centers in Boston and Chicago. Savvis also has extra dark fiber capacity on the Cable & Wireless backbone, which it acquired when it bought C&W America (Exodus) in 2004.