Equinix WhitePaper  Trends in Financial Data InfrastructureTrends in financial data infrastructureBringing together networ...
Equinix White Paper                                                                                                       ...
Equinix White Paper                                                                                                       ...
Equinix White Paper                                                                                                       ...
Equinix White Paper                                                                                                       ...
Equinix White Paper                                                                                                       ...
Equinix White Paper                                                                                                       ...
Equinix White Paper                                                                                                      8...
Equinix White Paper                                                                                                       ...
Equinix White Paper                                                                                                       ...
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Equinix key trends in financial data infrastructure

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Data center architecture for trading firms and other financial companies.

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Equinix key trends in financial data infrastructure

  1. 1. Equinix WhitePaper Trends in Financial Data InfrastructureTrends in financial data infrastructureBringing together network providers, asset managers, brokerages, exchanges andtrading platforms as well as market data and analytics providers, network-neutral datacenters can dramatically lower the number and cost of high-speed interconnections.SummaryNo stranger to turbulent change, the financial services industry continues to face revenue and cost pressures as well asan increased need to operate globally. Exchanges have merged and relocated, new financial centers and trading venueshave appeared, and the market share for incumbent players has declined. Established players have been required toadjust both strategically and operationally to survive in this evolving marketplace. As a result, many firms are rethinkingtheir technological infrastructure and evaluating co-located services.Demand for fast, reliable and cost-effective technology has grown significantly in the last decade. Reliability andthroughput are more important than ever before, and firms that were once content to operate their own data centersor co-locate infrastructure with a financial extranet are evaluating their ability to maintain a competitive position at amanageable total cost of ownership.At the same time, the number of options to consider when PARIS SINGAPORE SYDNEY TOKYO ZURICH CHICAGO NEW YORK FRANKFURT GENEVA LONDON HONG KONGdetermining where an order may be best executed hasincreased. As a result, the number of required connection points Clearing Exchanges Firmshas grown. In this environment, the ability of network-rich datacenters to connect to the various execution venues has made Broker Market Data Dealers Providerstheir value more apparent. Bringing together network providers,asset managers, brokerages, exchanges and trading platforms as FIX Network Data Analyticswell as market data and analytics providers, these data centers Providers Providerscan dramatically lower the number and cost of high-speed Asset Financialinterconnections. Managers ExtranetsAlthough data centers owned by network providers currently News Feeds Carriersprovide a range of co-location services, they have not proveneffective in supporting traffic outside their own network. Equinix Global Service Delivery PlatformIncreasingly, network-neutral data centers are seen as aneffective option for firms pursuing global markets across theevolving financial ecosystem. Equinix Global Financial Ecosystem© 2010 Equinix, Inc. | www.equinix.com
  2. 2. Equinix White Paper 2Trends in financial data infrastructureTrends in capital marketsAs 2009 drew to a close, the Aite Group drafted n D eveloping a global presence and managing globalan impact note outlining what it saw as the most risk. Aite sees the importance of having a globalsignificant trends affecting capital markets in 2010. presence as “one of the key issues for sell-side andAmong the drivers: buy-side firms.”n M arket fragmentation and increased competition, n D emand for trading infrastructure innovation, particularly from multilateral trading facilities including low latency, throughput and support for (MTFs) in Europe and alternative trading multi-asset class trading. systems in the Canadian and Asia-Pacific markets. Taken together, these trends underscore the importantn I ncreasing commoditization of high-frequency role that technology vendors will play in supporting trading, particularly as independent traders have participants in the global financial ecosystem. At the same opened their own trading desks. time, those vendors are evolving, and the roles they play are shifting to better serve asset managers, brokerages, exchanges and trading platforms. The regulators are coming BPO Market and fragmentation BPO Pick up continues Going global Risk back on manager the plate consolidation It’s about Risk the data management goes real-time Back to the Clearing basics for the corner technology Commoditizing high frequency Source: Top 10 Trends in Capital Markets for 2010. Aite Group, January 2010© 2010 Equinix, Inc. | www.equinix.com
  3. 3. Equinix White Paper 3Trends in financial data infrastructure“Order flow from other geographic regions can be limited by a carrier’s connectivity,often affecting the growth of the financial services firm’s business.”The growth of co-location services Data center in Co-locate in phone Co-loca exchange-owned building company data center extraneThe changes in roles for technology vendors started adecade ago, when financial services firms began looking • Local phone company is • Carrier connectivity • Access tho the primary network. expands. end pointsfor opportunities to ensure capacity (headroom),improve connectivity, strengthen business resilience • Carrier connectivity limits • Carrier is territorial and • Extranets order flow from other does not attract competing territorial tand manage costs. geographic regions. networks. companie • Limited space, power, • Add marginal space, power, • Add margiFinancial services firms typically evolve their use of cooling, and headroom. cooling, a cooling and colocationdata center vendors in four stages: headroom. 1) uilding a data center adjacent to or in a B networked building 2) Co-locating in a phone company data center Ex S 3) Co-locating in a financial extranet data center Loca 4) Co-locating in a network-rich data center Local Phone Loca Co Co CompanyIn the first stage, the local phone company Local Phone Companyserves as the primary network. Order flow fromother geographic regions is limited by a carrier’sconnectivity, often affecting the growth of the client’s STAGE 1 STAGE 2 STbusiness, as well. Capacity to grow space, power andcooling is typically limited in these installations. Many firms start out in their own data centers, usingIn the second stage, the number of carriers to choose the local phone company for connectivity.from likely expands. Because carriers compete Once firms run out of space, they move to the phoneagainst one another across many industries and company data center to gain more headroom.markets, they typically are unable to bring thosenetworks into the data centers they operate. Theabsence of multiple carriers can affect latency.© 2010 Equinix, Inc. | www.equinix.com
  4. 4. Equinix White Paper 4Trends in financial data infrastructure“In network-rich data centers, financial services firms are able to access dozens ofcarriers and extranets, leverage global market data and order flow sources, and addsubstantial space, power, cooling and headroom.”The degree to which headroom improves when Co-locate in phone Data center in Co-locate in financial Co-locate in network exchange-owned buildingco-locating in a phone company data center depends company data center extranet data center rich data centeron the provider. Data center owners that have made a connectivity • Local phone company is • Carrier • Access thousands of new • Access dozens of carrierscommitment to this the primary network. expands. part of the business typically include end points from extranet. and extranets.additional capacity•in their plans, making it easier for is territorial and Carrier connectivity limits • Carrier • Extranets are often more • Leverage global market data does not attract competing territorial than phone and order flow sources.hosted businesses toorder flow from other expand. By comparison, a data center networks. companies geographic regions. • Add substantial space,owner that outfits a facility for a small number of clients is space, power, • Add marginal • Add marginal space, power, power, cooling, and • Limited space, power, cooling, and headroom. cooling, and headroom. headroom.less likely to allow room for expansion. cooling and colocation headroom.Financial extranet data centers give participating firms BT Radianzan opportunity to access thousands of new end points TNS EU Networksfrom the extranet, improving latency. Firms can also Coltbring extranets into their own data centers, although Extranet Savvis Level 3 Abovenetthis does not improve latency to the same degree. Savvis Local Phone ATTAs with telephone carriers, extranets often compete Local Phone Local Phone Company Companyacross industries and clients, potentially complicating Phone Local Company Companythe interconnections. As in stage two, headroom is Local Phone Companymarginally improved.The most mature and effective co-location strategyemploys a network-rich STAGE 1 In such data center. STAGE 2 STAGE 3 STAGE 4installations, financial services firms are able to accessdozens of carriers and extranets, leverage global market A s firms grow, they need more space and moredata and order flow sources and add substantial space, connectivity options, so they move to a financialpower, cooling and headroom. extranet data center. The firms that choose network-neutral dataThe network-rich data center also helps manage centers generally see the fastest growth and mostoverall cost and improve throughput, typically headroom while also dramatically increasing thedriving down latency through improved access and connectivity options for clients and simultaneously reducing connectivity costs.connectivity. Six-sigma uptime (99.999%) supportsbusiness resiliency, as well.© 2010 Equinix, Inc. | www.equinix.com
  5. 5. Equinix White Paper 5Trends in financial data infrastructure“The nature of this global marketplace means that the need for high-volume,reliable interconnections with strategic customers and partners has increasedexponentially.”Comparing distributed and hub(co-location) modelsTo manage the growing complexity of the financial Distributed model fails as bandwidth requirements and/or number of end points increaseservices ecosystem, many firms have pursued a model Exchangesin which specialist services are distributed across a Broker Market Datawide variety of network connections. In this model Dealers Vendorsexchanges, data vendors, clearing firms, financialextranets, broker-dealers and others have operated as FIX Network Clearingnodes on a far-flung network. Providers FirmsThis approach is effective in supportingspecialization within a firm, and network utility and Data Carrierssystem value of a financial network has increased Analyticsas users and providers are added to the distributedecosystem. Unfortunately, the nature of this global Asset Financialmarketplace means that the need for high-volume, Managers Extranetsreliable interconnections has increased exponentially. News FeedsThe distributed model fails as the number of 10 End-points = 45 Connections Metcalfe’s Law: N(N–1)endpoints increases. Using Metcalfe’s Law, we see 100 = 4950 Connections 2that the number of endpoints required to support 10,000 = 49,995,000 Connections Reed’s Law: 2N–N–1a distributed model increases from 45 (10 users)to almost 5,000 (100 users) and nearly 50 million Metcalfe’s Law(10,000 users). Eventually, the cost of maintaining a U tility and systemic value of the financial networkspecialized, distributed infrastructure overwhelms increases as users and providers are added. Thethe benefits associated with that system. need for connections increases exponentially. Reed’s LawThe distributed model has also struggled to maintain E ventually, the costs and infrastructure needsthe capacity required to support algorithmic overcome the economic benefits of the system.trading, among other demands. The result: Throughputbandwidth requirements are increasing rapidly, Algorithmic trading is driving up network capacityand infrastructure upgrades are trending toward needs, dramatically increasing bandwidth require-continuous. ments and demanding continuous infrastructure upgrades.© 2010 Equinix, Inc. | www.equinix.com
  6. 6. Equinix White Paper 6Trends in financial data infrastructure“The reduction in the number of circuits reduces costs even if bandwidth requiredand the number of end points increase.”By comparison, a centralized financial ecosystem Centralized interconnection points leverageleverages economies of scope and scale for all economies of scope and scale for all participantsparticipants. By co-locating within a network-rich Exchangesdata center, exchanges, data vendors, clearing firms, Broker Dealers Market Data Vendorsfinancial extranets, broker-dealers and others candramatically reduce the number of circuits required Clearing FIX Networkto support multiple counterparties. Providers FirmsThis approach helps financial services reduce EQUINIX EQUINIX NEW YORK LONDONand better manage costs while also improvingthroughput. Participants in a network-rich data Datacenter pay for one data connection into the data Analytics Carrierscenter, and counterparty transactions take placewithin the data center. Asset Financial Managers Extranets NewsIn this configuration, high-speed local area network Feeds(LAN) connections replace individual wide-areanetwork (WAN) circuits that the distributed model 100 Counter Parties = 200 Circuits The Law of the Hub: HN (96% reduction)uses to reach counterparties. The reduction in thenumber of circuits reduces costs even if bandwidth Costrequired and the number of end points increase. n ay for one network connection — into the datacenter. P n Counterparty connections happen inside the datacenter. The centralized or hub model also improves n AN cross-connections replace individual WAN circuits Lthroughput. The efficient, network-rich data center to counterparties.configuration reduces latency to its physical minimum. n ramatically reduce costs even as bandwidth and end DThe shared internal connections support significant points increase.growth, so individual user bandwidth can increase Throughputwithout incurring any cost increases or penalties. n atency reduced to physical minimum, while bandwidth L can increase exponentially without cost penalties. n 99.999% availability. © 2010 Equinix, Inc. | www.equinix.com
  7. 7. Equinix White Paper 7Trends in financial data infrastructureThe value of a shared centralized financial n U se dense interconnection points to reduce costsecosystem is also seen in availability. As noted for circuits;earlier, 99.999% uptime is the standard for these n L everage economies of scale for all participants inconfigurations. the centralized network;Unquestionably, the financial industry will continue n S implify connection needs by housing participantsto scale, and its technology must increasingly do so in a limited number of geographic locations; andin new, more predictable and more effective ways.By migrating from a distributed architecture to one n S implify network management by unifyingthat capitalizes on the “law of the hub,” financial connection standards in an environment in whichservices firms will be able to: throughput and uptime are critical measures. “Law of the Hub” Centralized interconnection points leverage Distributed model fails as bandwidth requirements and/or number of end points increase economies of scope and scale for all participants Exchanges Exchanges Broker Market Data Broker Market Data Dealers Vendors Dealers Vendors FIX Network Clearing FIX Network Clearing Providers Firms Providers Firms EQUINIX EQUINIX NEW YORK LONDON Data Carriers Analytics Data Analytics Carriers Asset Financial Managers Extranets Asset Financial Managers Extranets News News Feeds Feeds 10 End-points = 45 Connections Metcalfe’s Law: N(N–1) 100 Counter Parties = 200 Circuits The Law of the Hub: HN 2 (96% reduction) 100 = 4950 Connections Dense interconnection points reduce costs for circuits. 10,000 = 49,995,000 Connections EconomiesLaw: 2N–N–1 Reed’s of scale available for all the participants in the network. Limited geographic locations simplify connection needs. Bandwidth can increase exponentially as needed.© 2010 Equinix, Inc. | www.equinix.com
  8. 8. Equinix White Paper 8Trends in financial data infrastructureEQuinix co-location servicesOver the last decade, Equinix has developed a Equinix maintains robust, diverse inbound andcomprehensive network-rich data center solution outbound connectivity options. Broad carrier choicesbuilt around four core principles: give Equinix clients an extensive mix of high- bandwidth, low-latency network offerings, ensuring n C onnectivity competitive pricing. n C apacity n C ost control Equinix also maintains headroom for its clients to n B usiness resiliency grow. Focusing on physical space, power and cooling, the firm’s goal is to operate strategically-located dataProximity to the financial services client base is a key centers and expand facilities and campuses to ensurecomponent of the Equinix data center business model. Equinix’s ability to meet the needs of new clients andEach data center includes the clearing firms, exchanges, expansion requirements for existing clients.broker-dealers, market data providers, networkproviders, data analytics providers, asset managers, This considered approach helps Equinix clientsfinancial extranets and carriers in a given manage their costs, particularly whengeographic space. Strategic locations compared against the private data centerin key global market centers, CO model. With Equinix, firms move e NN Ecombined with in-building E NC C to LAN-based connections tocross-connects, provide low LI accommodate demands for SI TI Vlatency and high throughput. RE IT Y higher bandwidths. This approach canExecution venues typically dramatically reduceplace matching engines or CO connectivity costs andaccess nodes in Equinix ST Y lower the trajectory fordata centers, improving CO C IT technology investments,throughput. Internal to the data PA NTR O CA improving margins.center, local cross-connects support Lhigh-speed data transfer (100 Mbps, Finally, Equinix helps its clients maintain or1 Gbps or 10 Gbps) at fixed monthly rates, improve business resiliency. The landscape forproving participants with both capacity market centers has changed repeatedly in the lastand cost stability. decade, and market fragmentation and related regional competition is expected to increase.Equinix is “carrier-neutral,” and it offers the use ofnetworks and financial extranets that are critical to the In addition to a data center architecture that offerssuccess of its clients. Even in the firm’s most established significant uptime, low latency and cost predictability,data centers, up to 80% of the cross-connects go to Equinix offers its clients flexibility and broadcarriers, making it critical to support efficient data connectivity options that will outlast the changes, sometransfer outside as well as within Equinix facilities. not yet predicted, in the financial services marketplace.© 2010 Equinix, Inc. | www.equinix.com
  9. 9. Equinix White Paper 9Trends in financial data infrastructureEquinix: Enabling the Global Financial MarketplaceFor buy-side firms, Equinix data centers provide access to a broad range of trading, risk and compliance vendors. Each datacenter offers a resilient infrastructure proven capable of meeting the most demanding requirements. Equinix provides onsiteconnectivity to a broad range of liquidity pools, pricing and data vendors, trading systems and brokers. Equinix also helps buy-side firms reduce connectivity costs, simplify data center management, and maintain the ability to scale with ample headroom.For sell-side firms, Equinix data centers offer low-latency connectivity to key execution venues and data sources. Each facilityprovides onsite access to regional, national and global carriers, simplifying interaction and reducing connectivity costs. Datacenters also link members of the local financial ecosystem, improving access to potential customers and partners. Equinixprovides sell-side firms with a broad range of choices in low-latency data feeds. The data centers support high-volumemarket data feeds at a manageable (and predictable) cost, even as volumes fluctuate.For execution venues, Equinix data centers co-locate matching engines and access nodes, providing onsite carrier accessand the headroom needed to accommodate a growing number of members and liquidity providers. Data centers alsoensure proximity to market data distributors as well as access to members of the local financial ecosystem, increasingopportunities for order flow.As exchanges merge and relocate and new financial centers and trading venues emerge, Equinix provides executionvenues, buy-side and sell-side firms with the foresight and extensive connectivity needed to cost-effectively supporttheir businesses in an uncertain environment. In choosing Equinix, members of the financial services ecosystem can besure that their data center decisions will prove both cost-effective and operationally sound over the long term. Buy Side Sell Side Execution Venues Real-time Market Data Feeds Portfolio Management Execution Matching FIX Gateways and Connectivity FIX Gateways and Connectivity Order Risk Management Algorithms Engines Analytics Systems Exchange Gateways Feed Handlers Smart Order Matching Compliance Execution Routing Engines Management Pre-trade Systems Post Trade Matching Analytics Settlement and Engines Processing Signal Order Generation Management Post Trade Matching Systems Compliance Engines Trading and Reporting Algorithms Latency Monitoring© 2010 Equinix, Inc. | www.equinix.com
  10. 10. Equinix White Paper 10Trends in financial data infrastructureAbout Equinix In The Global Financial MarketsEquinix provides a neutral meeting place for the world’s leading financial market participants including trading venues,buy and sell side firms, market data providers, technology providers and financial networks; that locate servers andinfrastructure within Equinix data centers in order to support highly reliable, low latency connectivity for a broad rangeof market participants. Learn more at: http://financial.equinix.com.This white paper contains forward-looking statements that involve risks and uncertainties. Actual results may differ materiallyfrom expectations discussed in such forward-looking statements. Factors that might cause such differences include, but are notlimited to, the challenges of acquiring, operating and constructing IBX centers and developing, deploying and delivering Equinixservices; unanticipated costs or difficulties relating to the integration of companies we have acquired or will acquire into Equinix;a failure to receive significant revenue from customers in recently built out or acquired data centers; failure to complete anyfinancing arrangements contemplated from time to time; competition from existing and new competitors; the ability to generatesufficient cash flow or otherwise obtain funds to repay new or outstanding indebtedness; the loss or decline in business from ourkey customers; and other risks described from time to time in Equinix’s filings with the Securities and Exchange Commission. Inparticular, see Equinix’s recent quarterly and annual reports filed with the Securities and Exchange Commission, copies of whichare available upon request from Equinix. Equinix does not assume any obligation to update the forward-looking informationcontained in this press release.Equinix and IBX are registered trademarks of Equinix, Inc. International Business Exchange is a trademark of Equinix, Inc.© 2010 Equinix, Inc. | www.equinix.com

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