SGX Opens Low-Latency Co-Lo ‘Community’

The Singapore Exchange will today (Monday, April 18) unveil its new datacenter that provides co-location for the first time with substantially reduced latency to its trading and data engines, and connectivity to a “community” of other market participants, vendor services and regional trading venues.

SGX began building the new facility in an industrial area of Singapore’s Serangoon district in response to changing characteristics of firms trading on the exchange.

“In 2008, we recognized that there was a community of algorithmic and high-frequency traders coming into our market, and at that time, we weren’t ready to introduce co-location… so we launched proximity hosting with a third-party provider,” says Dominic Lim, vice president of market data and access at SGX. “The profile of our customer base has changed over the years—many point-and-click firms have moved to machine-based trading… and it’s because they have changed that we decided to introduce co-location.”

Lim says the majority of this high-frequency flow comes from US and European firms that run trading strategies locally—though the exchange is also seeing interest from local firms and former SGX floor traders.

The proximity hosting solution—which is still available via third parties such as SingTel and BT—already provided sub-millisecond connectivity to SGX, though the co-location service will reduce that to a maximum of 100 microseconds, Lim says. In fact, the exchange will offer two tiers of co-location: Tier 2, a lower-cost solution that provides roundtrip latency of 100 microseconds, priced at S$ (Singapore dollars) 6,000 per month per 42-unit rack, and Tier 1 co-location with roundtrip latency of just 40 microseconds for S$12,000 per month.

Brokers could also lease multiple racks in the facility and host equipment on behalf of clients—even using a mix of Tier 1 and Tier 2 services, says Tinku Gupta, senior vice president and head of market data and access at SGX. Moving from Tier 2 to Tier 1 is a seamless upgrade, so firms can begin their rollout at one level of investment and upgrade over time as needed, she says.

“Those who are less latency-sensitive but want to host in our environment will take the Tier 2 offering, allowing us to create a community of brokers, funds and information services,” Gupta says. “The value proposition for Tier 2 is not just about latency—though it is still faster than an outside datacenter. The value is in the ‘community’ and the ability to access other markets, services and information providers in the same datacenter.”

These include more than half a dozen network providers with equipment in the facility to provide connectivity to other markets where SGX participants trade—such as the Osaka Securities Exchange, CME Group, or pan-Asian dark pool Chi-East, which will co-locate in the facility.

Although SGX’s own next-generation trading platform will not go live until August, the exchange has already moved its existing trading engines to the new datacenter, and more than 50 market participants have already subscribed to either Tier 1 or Tier 2 co-location packages ahead of today’s go-live date, Lim says. As a result, the exchange has already extended its footprint in the facility, giving it enough space to meet client demand, Gupta says.

The exchange will continue working on the co-lo center into next year to provide other services such as “remote hands” support, storage options and disaster recovery facilities, Lim says.