Colocation has established itself as the access mechanism for trading firms requiring the fastest possible execution. It’s widely accepted that for firms wanting the lowest latency access to a specific market there is no substitute for placing their trading applications as close as possible to the matching engines themselves, making it the solution of choice for all but those focusing on multi-venue multi-location arbitrage.
But the perception to date has been – and justifiably so – that exchange colocation is a premium service reserved for the larger institutions. For many smaller and remote practitioners – hedge funds and prop traders who lack the IT resource normally associated with colocation – cost is a prohibitive factor in their decision whether to colocate.
In the aftermath of the financial crisis, the period from 2009 through 2010 saw liquidity risk rise from relative obscurity to a position of prominence on regulatory agendas worldwide. One year on, liquidity risk management remains high on the agenda for institutions across the global financial services industry.
High frequency trading (HFT) is now a term recognised by the mainstream. This wide familiarity has coincided with maturity of HFT practices, the explosion in their use, and a flattening out of the potential returns as competition increases.
As elements of the global financial markets regulatory puzzle are slowly pieced together, the case for enterprise risk emerging in 2011 as the long-awaited ‘killer app’ for enterprise data management is growing.
