Demystifying Exchange Colocation

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.