The European trading marketplace is in the midst of major change, in part driven by the introduction of the EU’s MiFID II regulation, which comes into force in January 2017. The net effect of the new regulation will be a more transparent, consistent and reliable market structure across asset classes, creating a European trading landscape that strongly resembles that in the U.S., boosting its appeal to U.S. investment firms of all types and sizes and on the buy side and sell side.
Key to a successful strategy though, will be deciding the most beneficial entry point to ensure low latency connection to European markets. With the right location, technology capabilities and interconnectivity, colocated data centers can help financial firms generate optimal return for their clients.
To better understand the current state of play in European market we commissioned A-Team Group to write a paper, taking knowledge from key opinion formers in the market. We launched the paper at an Executive breakfast in New York in conjunction with A-Team, USAM Group, Quincy Data and Eurex all presenting unique insights into the European market, forming a great overview of how to go about Trading Europe.
Below we’ve included a high-level overview of the importance of location, technology capabilities and interconnectivity discussed at the breakfast.
Location, location, location
London is the EU’s main financial center with access to key trading venues including the London Stock Exchange, BATS Chi-X, the Euronext markets and ICE Futures Europe. This makes the City of London the logical entry point for U.S. firms wishing to trade not just on London’s resident markets but also beyond into the main European hubs, such as Stockholm, Milan, Madrid and Frankfurt.
Once a firm has access to trading venues across Europe, it is key for high performance traders to ensure that they can access those markets across the continent in the shortest possible time. Previously, traders would connect their data in colocation centers via fiber to the exchanges hosted respectively in those locations, however with microsecond speed times, new, low-latency microwave network connections are now in high demand.
At the forefront of this trend is McKay Brothers, a leading microwave network provider, who is progressing methodically into the significant trading cities around the world. Today, they provide routing speeds for Frankfurt-originated orders to London at about 4.4 milliseconds roundtrip. With the Frankfurt-based Eurex Exchange as a leading indicator of European market direction, microwave network connections to Frankfurt, among other venues, is essential.
Communities of Interest
Having access that is extremely fast to key trading facilities, however, is not the only access that firms need. Communities of interest that provide interconnectivity within a single data center is a critical requirement. This ensures traders have an ideal mix of exchanges, ISVs and service providers only a cross connect away.
Interxion City of London
London is the gateway to Europe and selecting the right colocation data center from which to execute from can decide your fate when trading in Europe. Interxion’s City of London data center campus is situated equidistant from key liquidity venues, Slough in the West, Basildon in the East and right next to the London Stock Exchange. With access to microwave connectivity to Frankfurt, as well as all of the main market data vendors, ISVs and brokers, this makes Interxion London the ideal colocation data center from which to execute a European trading strategy.