Yesterday, just a week after opening its new data centre, SGX Singapore Exchange announced the launch of a new co-location service, which will enable ultra-low latency connectivity into its markets.
This service will allow the exchange’s customers to host their own “black box” trading systems within the SGX data centre, thus ensuring the fastest routes between those systems and the exchange’s market data services and matching engines.
According to SGX President Gan Seow Ann, this launch is a key step in the roll-out of the $250m SGX Reach initiative. Another significant step forward is planned for August this year, when the exchange’s new matching engine (built around technology from Nasdaq OMX and billed as being the fastest in the world with sub-90 microsecond round-trip times) is due to go live.
In the US and Europe, growth in high frequency trading has slowed significantly over the past year. In fact, according to Larry Tabb of the Tabb Group, HFT volumes have actually been shrinking in the US recently (see my recent report from the TradeTech HFT Focus Day). So it makes sense that proprietary high frequency trading firms and market makers are looking further afield, towards developing markets such as those in Latin America and Asia, for new opportunities to make money.
SGX obviously realizes this and no doubt hopes to attract such business by capitalising on a number of factors, including not only the technology offered via the Reach initiative, but a “Western-friendly” regulatory environment, a range of liquid securities and derivatives contracts and strong retail order flow.
Of course, exchange officials are licking their wounds following the failed ASX merger, which was recently blocked by Australian politicians. But SGX Singapore is still in a strong position to serve as the “gateway to Asia” for trading firms seeking new markets.
Initial signs look good for the exchange, given the fact that more fifty firms already signed up for the co-location service.
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