UPDATE: CME Taps Citadel Executive To Head Data-Center Push

CME Group Inc. (CME) said Tuesday that it hired a former Citadel Investment Group executive to head a new co-location and data-center business targeted at the computer-driven trading sector.

Craig Mohan will head the development of a new data center to be built in the Chicago suburbs and due to open in early 2012.

The world's largest futures exchange operator has opted to develop its own expanded facility to handle business tied to the fast-growing algorithmic trading sector.

It mirrors efforts by rival NYSE Euronext (NYX), which is preparing to open its own proprietary facilities in New Jersey and the U.K. later this year.

The units--tightly secured buildings home to high-speed networks serving mobile phone companies, websites and other data-intensive operations--have taken on greater significance for exchanges as high-frequency participants account for an expanding share of trading volume.

CME estimated in late April that 46% of trading activity in the first quarter came from proprietary trading firms, a group that includes high-frequency trading shops.

It has already broken ground on the new facility, which will house all trade-matching engines for futures and options products traded on its electronic Globex platform.

The plan is to provide co-location services, which allow electronic market-making firms and other speed-sensitive traders to situate their servers beside the exchange's matching engines, making trade execution times as fast as possible.

The practice has caught the eye of U.S. futures regulators, who are drafting a proposal to ensure that co-location is available to all exchange customers that want it, to ensure some traders are not getting a speed advantage.

As managing director of global infrastructure for Citadel, Mohan oversaw the company's data center and co-location activities. His title at CME is managing director of co-location and data center services.

A spokesman for CME declined to comment on the company's investment in the facility, or whether it planned similar initiatives in New York or London.

CME already maintains telecommunications hubs around the world to facilitate connections to its electronic markets, and reported in April that trading activity had risen 35% over the prior year.

CME vowed that the facility, which will be under the company's management, will be open to all customers and also is aimed at being environmentally friendly.

NYSE Euronext has estimated that it will spend $500 million developing its data center units. The Mahwah, N.J., location is slated to go live in the third quarter, with the Basildon, U.K., facility targeting an early fourth-quarter launch.

Customers are seen moving into NYSE Euronext's New Jersey facility in June, with migration to the U.K. facility expected in the following months.

-By Jacob Bunge, Dow Jones Newswires; (312) 750 4117; jacob.bunge@dowjones.com

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