Colt First Through the Door at NYSE Euronext’s Basildon Datacenter

European network provider Colt will become the first vendor to provide low-latency connectivity to NYSE Euronext’s Basildon, UK, datacenter, following the exchange operator’s decision to open the facility to carrier access.

Colt will enable members to co-locate at NYSE Euronext's Liffe and Deutsche Börse's Eurex datacenters, which allows a choice of connectivity partner, according to Andy Young, low-latency specialist at Colt.

Young says the move will bring Colt and its clients first-mover advantage, and will extend its low-latency services to high-frequency traders, prime brokers and algorithmic traders who wish to access NYSE Euronext.

"We have taken a decision this year to invest in the development of our low-latency connectivity to the key European markets, so that's a new investment for Colt this year," says Young. "We're looking to have that first-mover advantage and enable our clients to also have first-mover advantage in accessing those markets by using the Colt infrastructure. It also provides us with a good opportunity to extend the low-latency services we already provide to the key players within that space—high-frequency traders, prime brokers and other algorithmic traders. It enables us to extend our portfolio within those interesting organizations."

An Appetite for Electronic Trading
The derivatives market as a whole is showing increased appetite for electronic trading in 2012, says Young. There is also increased demand for low-latency infrastructure supporting trading across other asset classes, such as foreign exchange (FX).

We're seeing the need for centralized clearing in the OTC derivatives space, and certainly in the low latency space we're seeing more of a demand for electronic trading.

Meanwhile, there has been some concern over the impact of the European Market Infrastructure Regulation (EMIR) on the over-the-counter (OTC) derivatives market, but Young says he does not see it that way. "With regard to trading, ultra-low-latency and high-frequency trading, EMIR has no impact as it is aimed at clearing, settlement, central counterparties and trade repositories," he says. "We're seeing the need for centralized clearing in the OTC derivatives space, but certainly in the low-latency space, we're seeing more of a demand for electronic trading within the OTC markets, so EMIR has not really had a negative impact at all."

To connect to NYSE Euronext, Colt will use a direct fiber network that has been expanding across Europe for the last 20 years. However, over the past year-and-a-half, Colt has focused on updating the underlying technology of network, with all components across all routes installed to deliver the lowest latency through the most optimized route.

"What we've been doing over the last 12 to 18 months is ensuring we're working with best-of-breed vendors that can provide us the lowest latency component to the network, in particular the electronics that power the network," says Young. "So when it comes to the components of our network, we ensure we are using the lowest-latency equipment available."

Colt's system supports up to 100 clients on each route, providing more than enough capacity to meet future demands, so Young says he does not believe that capacity will pose a problem since it is the first vendor to deliver direct connectivity into Basildon, giving it an advantage, he says, over competitors such as euNetworks and Verizon.

"We see this as a strategic move for Colt and this is very much a market we're going to continue to play in for the foreseeable future," he says. "We don't see capacity as an issue at all. We're building enough capacity to support up to 100 clients on each route—much more capacity than the demand we see right now. That's not a problem at all."

The Bottom Line

*Colt will become the first carrier of connectivity to NYSE Euronext’s Basildon, UK, datacenter, following the exchange operator’s decision to open the facility to third-party network providers.
*Colt will deliver connectivity between the futures and options markets of NYSE Euronext's Liffe and Deutsche Börse's Eurex.
*As has been the case in equities for several years, the derivatives market is beginning to demand low-latency connections to exchanges to support high-frequency trading.