You don't understand. Allow colocation, but colocation can only happen in say NJ or any distance that is not less than a certain amount from the physical location of the matching engine location. Or leave them in NYC, but then draw a circle of say 10 mile radius around the location of the ECN. No one can be inside that circle. The speed of light will take care of the rest. Once you go outside the city limits of Chicago or NY, it is not that expensive to buy land and colocate racks upon racks of computers to your hearts content. The biggest expense then becomes the enourmous power consumption that these colocation facilities draw. But that is a different issue, and the point is there is plenty of space as long as you can pay. In the current facilities, _EVEN_ if you can pay, there is no more space! It is not the colocation itself that is the problem, it is the colocation where only the biggest players have the $ and power to colocate. If you are slower by a fraction of a mili second, you are out of the game. Another possibility is move the matching engines (ECNs) away from expensive city locations and put them in the middle of nowhere. In fact, they should put their computing centers near a waterfall, where they can then use potential energy in the form of gravity+water to power the facility. This is close to free, land is in ample supply. Everyone can be same distance to matching engine because you can build a football sized 10 story warehouse and it costs are trivial. Democracy.
Be careful, six of one makes half a dozen of another. Don't think about yourself, think about the industry and your bretheren as a whole. See my post above on colocation. You should not ban colocation. Simply ban colocation in the same place as the ECN. If everyone is forced to be at least a certain distance from the matching engine, that advantage goes away. It is bordering on ridiculous to put ECNs on an island where real estate costs a fortune! Madness!
Here is a business idea for someone. FIOS is getting to the point where it can do 100Mbs. Make a deal with the exchanges to distribute their multicast data on this nework. Retail traders can now see the entire market on a very reliable fiber backbone!
I am sorry Nitro, this statement of yours shows that you completely do not understand what we are talking about. There is NOT a single matching engine in NYC. Also moving them to the middle of nowhere will not help, firms will start paying ten of thousands of dollars to get fiber lines from NYC to middle of nowhere.
Exchanges DO distribute date via multicast now! Retail investor do not have computational power to process this data or money to pay for network connection.
Oh god. So you think I think there is one matching engine? Dude, these are examples of ONE MATCHING ENGINE. Use induction on the rest. As far as firms needing to get fibre lines to the middle of nowhere, all you need is a humble but very reliable line to your servers. Just enought to send graphics over.
Seriously, one of us has a comprehension problem. Maybe it is I who is doing a bad job of explaining myself
Yes. It's very unfair that those with a strong interest and ability to play the game should have any sort of advantage. This logic should be extended all the way - nobody should be allowed to trade based on real time quotes. All trades should be MOO orders for the following day so that everybody has access to the same after-market data. Anything less is grossly unfair.