If time is critical, you need to put your trading operations somewhere west of the Hudson River, but east of Newark.
If it’s not, you might as well put your other operations – typically called your middle- and back-office operations – where you can save the most money, instead of time.
That has been the argument for putting servers and network connections in, for instance, Iceland.
Ronald H. Bowman Jr., author of "The Green Guide to Power: Thinking Outside the Grid" and "Business Continuity Planning for Data Centers and Systems: A Strategic Implementation Guide," for instance, argues that trading firms and marketplace operators are wasting money on big "monolithic" data centers. Even as electronic networks proliferate, market data explodes and volumes surge, he’s probably not too keen on NYSE Euronext, for instance, spending $250 million – and trying to fill up – a 400,000-square foot data center in Mahway, N.J., with a railroad track running nearby (a possible security threat).
But now there’s a cloud hanging over the island nation – and not of the computing variety. Instead, it’s an overhang from both repeated explosions of volcanic ash and the unfortunate implosion of its economy, in the wake of the global credit crisis (see “Inside Job,” the movie and book).
Enter Wales, the 3-million population country that is part of the United Kingdom. And whose name translates roughly to a “foreigner’s land.”
That’s where a company named Next Generation Data Europe has set up shop, with a computing facility spanning 420,000 square feet in seven “data halls” not far from Cardiff, the capital.
Saving Money, Not Time
It’s two hours west of London. Not much help to the high-speed trading firms that want to ply their trade in The Docklands, where the data centers supporting trading in The City are generally located.
But Simon Taylor, chairman of Next Generation Data Limited, says, never mind. “in terms of brokering type organizations, you know, stock market, let’s say IT activity, we have very little, if nothing, in terms of trading floor type business,’’ he admits, without hesitation.
Wales – or Iceland, for that matter – is not about the front office, It’s about the middle and back offices. It’s about saving money, after the trade is made.
When time does not matter and cost does, it’s hard to beat data centers that are built on ash. Even in Wales.
In this case, the “ash” is the disappearance of the Korean semiconductor, electronics and appliance manufacturing conglomerate, LG.
In the late ‘90s, LG put $250 million into the campus. Added a power station. The site was 99 percent finished.
Then, the Korean stock market imploded. LG shut up shop and went back overseas. Four thousand (potential) jobs were lost.
Until NGD, in 2007, said it would take over and make it the largest data center development on the continent NGD got a plant worth $250 million by putting about $39 million into it and agreeing to a lease for 125 years.
Okay, so maybe now, there are only 30 full-time jobs at this next-generation digital cavern. And 150 contractors.
But the savings are self-evident to controllers and chief financial officers in any industry, including capital markets.
If you want to settle trades at high-volume and conduct other post-trade administrative chores, it’s all about efficiency and the lowest possible cost. Where the real estate for data centers in The Docklands costs about $40 a square foot to build out, it’s only $10 a square foot in the Welsh case. Power costs roughly half as much near Cardiff as near London. Making the power connection (properly) can be five times as costly, in a dense urban center (think $15 million instead of $3 million).
“In a nutshell, it’s hugely expensive,’’ to set up shop in or near London, argues Taylor. “There’s lots and lots and lots of risk factors attached to London.”
Not least of which, of course, is terrorist activity. In 1996, the Provisional Irish Republican Army ended a seventeen-month ceasefire in The Docklands that killed two people and caused an estimated bomb detonated in a financial district, killing two people and causing an estimated $140 million worth of damage.
“If that bomb had been any bigger, and it had, you know, blown a bigger hole in the grounds, that could have, you know, the connectivity running under the ground could have been impaired,’’ said Taylor.
Taylor’s Next Generation Data center is not, though, looking at the “time critical market” that has to be in The Docklands, to compete on microsecond trading of securities.
It’s going after the 85% of computing that is not time-critical.
“Our customers, definitely want a high quality facility, half the price of London, with enhanced security and power, which we offer,’’ he contends.
They also want a bomb-proof facility. The NGD center has prison-grade, infrared protection on inner walls, bomb-proof glass on the front of the building. The facility itself is “triple-skinned” with three sets of 90-millimeter concrete walls. And, NGD went so far as to see to it that local roads were re-routed, to limit adventurers.
Now, it’s got capacity to spare. It has enough power to run the city of Bristol, with its 433,100 residents. Good thing, having one’s own power station
“We tend to be about half the price of London,’’ said Taylor. “But the reality is, it’s a much higher quality at half the price of London.’’
Accountants, take note.
This story originally appeared on Securities Technology Monitor.
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