Financial Services Data Centers: Power, Proximity and Profit Executive Summary The data center of the future will more than ever before focus on efficiency -- efficient use of power, efficient use of floor space, efficient use of compute cycles.  Financial services firms, with slashed budgets and mandates to generate more with less, will embrace this drive toward efficiency with open arms.  Solar panels will replace generators, new servers will run cooler yet faster, and the idea of shared services will go beyond heating and cooling, and move into cloud computing.

Power, location, connectivity and flexibility have come to the forefront as critical elements in data center creation and selection.  Sure, each was needed before, but the economics and politics of today’s world have changed the game considerably.

Data centers will still remain the realm of engineers, but the front office will become ever-more-so-acutely aware of how important they truly are.  Trading desks already include physicists; in the future, they will contain network engineers.  Whereas MBAs once spoke mainly about rate curves and spreads, they will soon talk about kilowatts and microseconds.  The major market changes that were caused by recent financial events have not only shifted the way in which we view investment banks, but the way in which investment banks view data centers.

For the relatively few trading ultra-low-latency strategies, choosing a data center is easy.  Am I within feet of the matching engine?  Will your facility provide me the lowest latency possible?  Yes?  Sold!  But for the countless other firms looking to manage expenses while still generating a profit, the decision process is far more complex.

Space must be flexible in several ways.  Today’s environment demonstrates once again that there is no sure thing, so signing a contract for data center space must allow room for nearly any situation, good or bad.  Power and space must be available if expansion is required, and likewise the ability to scale down whether due to (1) more-efficient equipment or (2) lower demand for compute must also be an option.

A hot market segment brings with it multiple competitors with varied offerings.  While providing a well-priced market with a variety of services for the consumer, the choice of facility is quite overwhelming.  Are 100 microseconds saved worth the extra monthly charge?  Does more power per cabinet create a greater advantage than being 40 miles closer to the exchange?  Only through close examination of an individual firm’s trading strategy can the true return on investment be understood.

The TABB Group Report on Financial Services Data Centers:
Power, Proximity and Profit
This report is based on conversations with financial markets participants including bulge bracket broker-dealers, proprietary trading firms, execution venues and solutions providers.  Front office staff and technologists all presented unique views of how data centers are used and what issues reign most important.  The report outlines the importance of data centers for all financial services firms, reviews the different approaches taken by data center providers and provides a blueprint for firms looking to choose data center space best suited to their needs.