Co-location (colo) for trading software

A

Allistah

Hi everyone..

I was hoping that someone could tell me the reason why people use co-locations to run their trading software? What does this gain you? With the speed of home Internet connections, gamers can get very low ping times to almost anywhere.

Can someone tell me more about what is gained and provide some real data? I mean, are you going from 5 ticks of slippage to 1 or what?

How much do these colo systems cost?

Thanks for any info you may have..

-Alli
 
This is only relevant if you do HFT, where microseconds count. If you trade on a lower frequency than 1 sec, this is irrelevant for you.
 
Can you not run a little brain effort yourself?

Let's get into some facts:

* Colocation is in a data center.

That means:

* Depending where you are, you can reduce latency. I do not talk HFT, but I personally am located in europe - that is 120ms to the US. A lot of latency for technical things to get wrong.
* Data centers normally have good power, including USV and generators. That is a lot more than people have at home.
* Internet in data centers also is somehow not really going down regularly like some crappy providers.

2 and 3 mean that if you choose your datacenter right (close to broker, exchange) the chance that you are down during some smaller issue (snowstorm etc.) is pretty low. 1 to 3 means that smaller issues on the internet are just not happening - no long distance cables that can be broken. Those issues are both relevant to the USA (where a surprising number of people is still on dial up, like in any country on a 3rd world infrastructure world) as well as in other countries, where simply the long distance adds a lot of possible issues.

As I said - I personally am in Europe, Poland to be exact. My issues are:
* Power supplies are not exactly stable sometimes. Given that I rdo backtest and optimizations here I have a 15kw battery system (yes, hat is nearly 300kg of batteries). I am also on the internet by radio link which SOMETIMES has a tendency to go down for a minute. not often, but often enough to care about it. I also am around 120 to 130 ms from the USA, trading on the CME.

Tell me why common sense would NOT demand me to actually colocate? I can take down latency (and I like sub 10ms - lot less time for things to go wrong, and I don't really need to be behind every guy on dsl) as well as significantly improve my technical reliability a LOT. Good, I am not as primitive as large parts of the USA (supposedly still on analogue modems - ouch), but even here it makes sense.
 
Quote from NetTecture:

Can you not run a little brain effort yourself?

Let's get into some facts:

* Colocation is in a data center.

That means:

* Depending where you are, you can reduce latency. I do not talk HFT, but I personally am located in europe - that is 120ms to the US. A lot of latency for technical things to get wrong.
* Data centers normally have good power, including USV and generators. That is a lot more than people have at home.
* Internet in data centers also is somehow not really going down regularly like some crappy providers.

2 and 3 mean that if you choose your datacenter right (close to broker, exchange) the chance that you are down during some smaller issue (snowstorm etc.) is pretty low. 1 to 3 means that smaller issues on the internet are just not happening - no long distance cables that can be broken. Those issues are both relevant to the USA (where a surprising number of people is still on dial up, like in any country on a 3rd world infrastructure world) as well as in other countries, where simply the long distance adds a lot of possible issues.

As I said - I personally am in Europe, Poland to be exact. My issues are:
* Power supplies are not exactly stable sometimes. Given that I rdo backtest and optimizations here I have a 15kw battery system (yes, hat is nearly 300kg of batteries). I am also on the internet by radio link which SOMETIMES has a tendency to go down for a minute. not often, but often enough to care about it. I also am around 120 to 130 ms from the USA, trading on the CME.

Tell me why common sense would NOT demand me to actually colocate? I can take down latency (and I like sub 10ms - lot less time for things to go wrong, and I don't really need to be behind every guy on dsl) as well as significantly improve my technical reliability a LOT. Good, I am not as primitive as large parts of the USA (supposedly still on analogue modems - ouch), but even here it makes sense.
More...

hi NetTecture, good reply, common sense would state that you should colocate. Question for you, as I have looked around and did not find the answer to my question:

What exactly is the process of colocating? Do you actually get a remote computer in a colocated location where your strategy is being run and you can remote into that computer? How does data feed work? Some of these real time data feed are not located in NY, Chicago. Is everything being run in a colocated location (strat, data feed, trading platform etc). How do they install your algo on the colocation? Do you install your trading platform and the algo for the your strategies on your trading platform and connect to the market, etc?

Thank you for your insight.
 
Quote from calhawk01:

hi NetTecture, good reply, common sense would state that you should colocate. Question for you, as I have looked around and did not find the answer to my question:

What exactly is the process of colocating? Do you actually get a remote computer in a colocated location where your strategy is being run and you can remote into that computer? How does data feed work? Some of these real time data feed are not located in NY, Chicago. Is everything being run in a colocated location (strat, data feed, trading platform etc). How do they install your algo on the colocation? Do you install your trading platform and the algo for the your strategies on your trading platform and connect to the market, etc?

Thank you for your insight.
More...

In my aparticular case I am renting computers from a data center in chicago.

I get initially a web based / java applet based remote control panel with something like remote desktop, only that it is on the hardware level (remote key/mouse/monitor) which allows me to even update the bios - it runs on a separate IP and a separate computer that is piggybacking on the original one. This is standard tech for servers.

I then have a windows install on the machines that actually is running some virtual machines and permanently vpn connected to my home network. This allows me to easily just go rdp into any machine.

In this case they do not install anything. They do not even provide an OS - for me it is just another node in the virtualization grid that I handle as all the other machines.
 
Quote from NetTecture:

Can you not run a little brain effort yourself?

Let's get into some facts:

* Colocation is in a data center.

That means:

* Depending where you are, you can reduce latency. I do not talk HFT, but I personally am located in europe - that is 120ms to the US. A lot of latency for technical things to get wrong.
* Data centers normally have good power, including USV and generators. That is a lot more than people have at home.
* Internet in data centers also is somehow not really going down regularly like some crappy providers.

2 and 3 mean that if you choose your datacenter right (close to broker, exchange) the chance that you are down during some smaller issue (snowstorm etc.) is pretty low. 1 to 3 means that smaller issues on the internet are just not happening - no long distance cables that can be broken. Those issues are both relevant to the USA (where a surprising number of people is still on dial up, like in any country on a 3rd world infrastructure world) as well as in other countries, where simply the long distance adds a lot of possible issues.

As I said - I personally am in Europe, Poland to be exact. My issues are:
* Power supplies are not exactly stable sometimes. Given that I rdo backtest and optimizations here I have a 15kw battery system (yes, hat is nearly 300kg of batteries). I am also on the internet by radio link which SOMETIMES has a tendency to go down for a minute. not often, but often enough to care about it. I also am around 120 to 130 ms from the USA, trading on the CME.

Tell me why common sense would NOT demand me to actually colocate? I can take down latency (and I like sub 10ms - lot less time for things to go wrong, and I don't really need to be behind every guy on dsl) as well as significantly improve my technical reliability a LOT. Good, I am not as primitive as large parts of the USA (supposedly still on analogue modems - ouch), but even here it makes sense.
More...

Perhaps price is a valid reason? Note that I'm not referring to simple server hosting here which makes sense, but really co-locating close to exchanges is a waste of $$$ unless you really need low latency.
 
Quote from QuantWizard:

Perhaps price is a valid reason? Note that I'm not referring to simple server hosting here which makes sense, but really co-locating close to exchanges is a waste of $$$ unless you really need low latency.
More...

No.

"Close to the exchange" is relative. I have below 10ms latency - in fact, I have low single digit.

See, chicago is big. There are some data centers there. I dont need ultra low latency - so I go with regular hosting, but I can still select a data center in the same place with decent routing.

The price is not higher than any other colocation.
 
NetTecture pretty much stated the reasons for colocating, specially when doing ATS...

now, one can do VPS or physical, I prefer physical... in my case I have two Co-Lo's... one in CHI and another one in NYC... why? why not... I had the servers, colo is $100 per U with 3Mbps outgoing and unlimitted incoming... I do my own support (duh!) and the servers are redundant everything and redundant to each other... I further partition them by running vSphere (VM's) and run my stuff inside the VM's...

I am not after LLT HFT, but if I can beat those with 2ms+ while my only objective was a reliable connection and uptime, then why not.
 
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