NYSE Euronext Turns On NJ Data Center As E-Migration Begins

NYSE Euronext this week flipped the "on" switch for its new data center facility, shifting all trading systems for its New York Stock Exchange and Amex equities markets to a nondescript building 35 miles from the exchange's Wall Street trading floor.

The parent of the Big Board is the second major U.S. exchange company to set up shop in its own data center this month, after Chicago-based CME Group Inc. (CME) last week moved its futures-trading engines into a proprietary facility in suburban Illinois.

The migration comes as exchanges seek to sell a broader range of technology services to a market that has become almost entirely electronic, while exerting control over the increasingly valuable space that houses their systems.

"From a lot of perspectives, this is an important milestone for us," said Lawrence Leibowitz, chief operating officer of NYSE Euronext, which aims to build its technology arm into a $1 billion business over the next five years.

NYSE Euronext's Mahwah, N.J., data center, part of a $500 million build-out that includes a sister facility in Basildon, Essex in the U.K., is distinguished by a handful of buttonwood trees planted to evoke the exchange's formation under such a tree in 1792.

The facility, as big as seven football fields, gives the exchange company at least two decades' room to grow, according to Leibowitz. Space is being sold to hedge funds, banks and high-frequency trading firms looking to situate their servers as close to the exchange's trading engines as possible, to maximize speed.

Hundreds of customers so far have signed on for such co-location services, Leibowitz said. CME aims to begin offering similar capabilities in 2012.

In the coming months, NYSE Euronext will shift its options markets and electronic Arca stock platform into the Mahwah facility, with the move-in seen completing early next year.

NYSE Euronext's U.K. futures market and European stock systems are expected to migrate into the U.K. data center beginning in October, finishing in the first half of 2011.

Exchanges' development of data centers puts them into a new business dominated by companies like Savvis Inc. (SVVS), Telx Group and Equinix Inc. (EQIX), which operate facilities that house other exchanges' systems alongside those of mobile-phone companies, websites and other network operators.

These units allow customers to benefit from being close to a wide range of networks and information sources--a shopping mall of potential connections. The exchange-operated facilities function like an outlet store, giving trading-minded customers the most direct electronic path to markets.

"Efficiency has always been something that markets strive for," said Alasdair Moore, co-owner of Fixnetix, among the biggest providers of high-speed trading connections to European investors and trading firms.

"On the NYSE floor you had runners who went between pits collecting prices, and the people who could assimilate information the quickest could update their prices more effectively and make more money--that principle has never gone away," he said.

NYSE Euronext will use its New Jersey and U.K. units as platforms to sell an array of data services, like managing customers' connection to other trading venues and packaging historical price information. A small number of staff works on-site in case servers need rebooting or hard drives must be swapped out.

A larger security detail guards the building, which was built to withstand explosions. Both NYSE Euronext and CME declined to detail the exact location of their units, citing security concerns.

At one of Equinix's Chicago facilities, visitors are escorted past bulletproof glass and through a series of doors secured with hand-scan devices before entering the climate-controlled halls of cabinets that house network systems.

Customers can be as fixated on security as the data-center operators. Telx Chief Executive Eric Shepcaro encountered one financial-services firm that hired a company to attempt both physical and virtual break-ins on a Telx facility, to measure its defenses.

"We passed the test, and they're now a customer," Shepcaro said.

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

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