Firms Leverage Data Centers

Financial institutions are leveraging co-location and other services of data center providers as they seek to maximize liquidity, both for themselves and for customers.

For instance, Savvis, a provider of cloud infrastructure and hosted IT solutions for enterprises, hosts Barclays Capital’s dark liquidity crossing network, LX, in Savvis’s NJ2 data center complex in Weehawken, New Jersey.

LX is Barclays Capital’s crossing network, which aggregates liquidity from its global client base, market structure investments and internal trading desks.

“For market participants, whether trading venues or brokerage or buy side, as they peripherally put some of their infrastructure into data centers, they can see the benefit of connecting to other venues and trading partners,” said Tony Kroell, vice-president of product marketing at Savvis. “So it becomes a growing ecosystem.”

LX is now the second largest dark pool in the U.S., according to Rosenblatt Securities’ Monthly Dark Liquidity Tracker.

The crossing network aggregates liquidity across the firm, including orders from clients and non-displayed trading partners, to provide users access to a deep and unique pool of liquidity.

“We operate a substantial dark pool, and with all the problems arising as a result of fragmentation, we are trying to meet all of our customers’ needs from a liquidity and capital perspective,” said Bill White, head of equities electronic trading at Barclays. “We provide functionality in dark pools for larger blocks and selective algorithms. We are one of the only full service equity businesses that operate in every part of the liquidity spectrum.”

LX can be accessed through Barclays Equities algorithmic trading strategies (including Hydra which sources liquidity from multiple dark market venues) and directly from leading OMS and EMS systems including RealTick.

Savvis hosts a number of the major displayed and non-displayed markets in the U.S., and is committed to providing high quality, low latency services that financial firms demand.

“The emergence of financial ecosystems allows firms to leverage economies of scale by using a dedicated IaaS [Infrastructure-as-a-Service] provider like Savvis in order to obtain data and connect to trading partners,” said Kroell at Savvis. “As these ecosystems grow, the services and solutions can co-locate in the data center to simplify their delivery of service.”

Savvis hosts trading systems and matching engines for many liquidity venues, including traditional equities and derivatives exchanges, dark pools, crossing networks and electronic communication networks.

Over 200 securities and trading firms are located in it NJ2 data center, including investment banks, broker-dealers, market makers, prop and quant traders, and service provides.

Matching engines for five of the nine largest U.S. equity dark pools are located in NJ2, which is responsible for half of the average daily volume traded in U.S. equities dark pools.