NYSE Invites Flash Exchanges To Operate Out Of Its New Digs
Nothing like telling your sworn enemies they are always invited to crash on your couch. Or operate their business out of your brand spanking new facility (for which they will pay a handsome fee of course.)
Securities Industries News reports that the NYSE has officially invited the exchanges at the heart of the Flash scandal, Direct Edge and NASDAQ, to come and collocate their servers out of the NYSE's new Mahwah, NJ facility, which Zero Hedge discussed before. Even after reading between the lines, one is uncertain about the humor factor of this disclosure: after all there is currently an all out war between the exchanges, which the allegedly non-Flashing NYSE has been beating the drum on repeatedly as a marketing point, yet allowing individual firms to provide up to 50% of the program trading volume, thus making one wonder just how diverisifed its roster of liquidity providers really is. It is not surprising that Direct Edge is not too crazy about the "offer."
From the article:
“Come on, Direct Edge. Come on Nasdaq. Come into this data center,’’
said Stanley Young, the chief executive officer of NYSE Technologies
and co-global chief information officer of NYSE Euronext.
The invitation came as Young tried to address how the New York Stock
Exchange – which rose to prominence with its human “open outcry”
trading system -- would take back market share from “faster and
cheaper” competitors, who have thrived by executing orders for
customers in thousandths or even millionths of a second in
all-electronic trading systems.
These “faster, cheaper” rivals, including Direct Edge and
Nasdaq OMX Group, have greatly cut in to the NYSE’s share of equity and
options trading. In the second quarter of 2009, the NYSE Group reported
average daily volume of 3.6 billion shares for NYSE across all U.S.
equity markets. That was 24.9% above the second quarter of 2008, but
9.5% below the first quarter of 2009.
What is the current volume breakdown between the different exchanges (for all those who think that NYSE volume is the end all be all of stock trading):
For August 2009. Direct Edge reported 1.75 billion shares handled per
day, representing 20.0% of NYSE equity volume, 15.6% of NYSE Arca and
NYSE Amex volume and 16.3% of Nasdaq volume. Nasdaq reported its average daily matched volume in all U.S. securities in July was 1.8 billion shares.
So is Flash master Direct Edge going to take the NYSE up on its offer:
Direct Edge is not likely to co-locate any of its servers at the NYSE facility.
Direct Edge’s primary data center is in a non-descript industrial
facility in Secaucus, N.J., operated by Equinix. Not co-locating at
NYSE’s facility in Mahwah can reduce its speed of executing orders for
NYSE-listed equities or options.
“It is one more hop," said Mark Spargo, a sales executive for high-performance computing products at chipmaker Intel.
And as for the ever increasing technological battle to get instataneous execution:
Young’s public offer came at a lunch panel at this high-performance
computing conference, titled “Building the World’s Fastest Trading
He said the NYSE has to operate a “world-class messaging network”
and be faster than other exchanges in executing orders. That might mean
overcoming such hurdles as a 40-millisecond delay in England, for
fulfilling regulatory requirements before trades are processed.
He also said there is no delay that will, long-term, be acceptable in processing trades.
“Isn’t it going to be fast enough when you get down to 50
microseconds? No, it’s not. It’s never going to be fast enough,’’ he
said. “In ten years time, it’s going to seem like a lifetime.”
And the conclusion, best read in the context of Ted Kaufman's speech from yesterday:
“The whole way markets will operate is up for grabs,’’ Young maintains.
And guess just who is "grabs-ing" right now, in their quest for complete market landscape domination.