My bill for co-location is 6 figures. per. month. So, you can call it whatever makes you happy but with such a huge price gap I think distinguishing what we are doing with two separate words is valid. For example, if you are trading CME products and you are 'co-located' in Chicago you are not actually that close to the exchange which is in Aurora. It's 100 micros away by microwave and 200ish by fiber. When internal latencies are frequently sub 10 micros that's a LONG way away.
Ok, I lack brain power so I'm getting confused. I need some clarification: hosting = your "hosting" your strategy "near" the exchange. Some FOR EXAMPLE: http://www.megatechsolutions.net/ they offer "cloud service" where you can host your strategy on THEIR computer. Apparently, http://www.rithmic.com/ also offers this? I've seen one of their workers posting links about "faster" execution all over ET. colocating = some companies "claim" that they offer colocating but it's not the "true" colocating?? True colocating= directly connected to the exchange? Vs "Fake colocating"= hosting at a server VERY close to the exchange? The prices for these are being thrown around from six figures to 50$ per month. What is the most cost affective solution and how is it actually implemented to get faster execution at an affordable price? Affordable= no more than $300 per month. Hosting vs colocating vs "fake colocating" Thank you in advance for whoever answers the above
It totally depends on your specific strategy. I don't see many scenarios where 'hosted' computers will reduce slippage (though they all claim that). To me, the main benefit would be reliability. I don't think that profitability would increase over running the same strategy at home. I believe that part to be just a sales pitch. That's for the majority of strategies. For something that truly needs low latency you have to do everything right - and colocation is the cheapest part of the equation. I took a look at Megatech. I kind of stopped once they said it's in their New York facility. I'm not sure which exchanges matching engines are left in New York - almost everything is in New Jersey. Maybe it's kind of close though. If your strategy is functioning off things like 'bars' and 'indicators' and you see people stepping in front of you right before your order goes out than yeah, hosting might help. That's an indication that your competition is retail. HFT deals much more with market microstructure than people realize. The strategies are totally different and they are not buzzing around stealing retail setups. I guess there's one exception. HFT for stocks will do anything they can to take all the passive orders for themselves. Whether that be using the 'hide not slide' or responding to flash orders, etc. If your strategy is removing liquidity in a semi-intelligent way you should be immune from all that BS. Stock exchanges lost their monopoly and had to compete for dwindling volume so they have catered to HFT. Futures exchanges don't have quite the same pressure so execution is more transparent. But with so little competition they have kept their fees much higher. That's why ICE can buy NYSE. If your broker does not offer hosting than your next bet is to find out where their gateway is and have a bunch of hosting providers ping that IP and tell you the times.
Thank you. I agree with you, it depends on the strategy. One of the strategy that I am TESTING requires to go in and out/reverse at certain times of the day. So I think colocating would be beneficial. Time frame, 1 minute and or tick
Reality check: I Do not care. My strats work with 10ms latency, 20ms latency. What you mean is direct excahgne colocation for HFT - have fun. That is useless. Unless you also invest into the hardware - overclocekd servers, FPGA data feed decoding. Sure, there is an edge, but not everyone is hunting for this edge. There is a world outside the rat race to the smallest latency for arbitrage.
I will speak as an IT guy... the co-location term is generic and implies your server is being co-located at a data center facility along the servers of a hosting provider and that you are renting floor space(cages) or rack space. you are assuming co-location, as a term, is specific to HFT/LLT.. and it isnt, it has existed for a long long time... yes, you can co-locate at the exchange data centers, but that is because the exchanges are selling rack space within their data centers (or cages in some cases as we have) as you have stated... hosted solution, what it actually means is that the hosting provided owns the hardware and you are renting resources on that hardware... also known as Dedicated... again, co-lo was a term even before it became popular with the financial services firms... and was in use even before that... so co-lo = floor/rack space (where you provide your own network fw, and at times even the network conn you want (carriermeets), and servers) and hosting = dedicated servers, vps, jails, etc..
Not necessarily. Generally nothing you can test with most data feeds requires exchange level colocation - if you want to test this you really need to have a VERY good data feed (sub-microsecond timestamps) to simulate your order feed right. I use nanex data for backtesting and system development. 25ms timestamp - no way I can even try backtesting and validating HFT setups. But I do not plan to. For me, colocation is about security, and IF I have to go to a data center - then I can go to one around the corner of the exchange. There is no sense in paying for a data center that is far away from where you trade, not only for latency, also for more possibly technical glitches (i.e. more meters fiber someone can cut). Generally, if you do HFT, colocation is the smallest cost. The infrastructure you need there is way beyond your comprehension. It is a rat race - we talk custom hardware (FPGA) that decodes the data feed, stock overclocked computers (you can buy them - for financial trading) and some other tricky JUST to be first. Custom Linux Kernel, custom network drivers, hot burning algos (loops assigned to cores that loop until data arrives - faster than an interrupt). Some (limited mental capability) person in this thread seems to think this is the only reason to go to a data center. And that everyone hunts the last microsecond. Maybe he needs it. Not everyone does.
IMHO, slippage is a function or how fast the market is moving, the spread, and if your order type... latency will merely reduce/increase your position in the queue ahead or behind of the people who saw the condition before you did and were able to react before you ever did... oh, when I mean people I really mean machines...
NetTecture - You are one of the posters who know their stuff and you have made valuable points in this thread. But please for god's sake lets not degrade the contribution made by another very well respected poster. The said poster is one of the very few (probably the only person) on this board who has direct experience in the HFT field and willingly shares his knowledge in an extremely cordial and respectful manner. So, you are welcome to have a different viewpoint but lets please not engage in personal attacks. Thanks for your understanding. Cheers.