The Johannesburg Stock Exchange (JSE) is to build a co-location facility to store clients’ computers and cut latency from 2400 to 100 microseconds.
Reduced latency will help the meet demands by JSE members and other stakeholders for increased speed.
The installation is timely: since the Millenium Exchange was introduced in July 2012, around 65% of the JSE’s trading volume has been through algorithmic trading. Total orders peaked at 1941 per second, while trades per second reached a high of almost 1000. Many JSE members, particularly UK firms, software providers and data vendors have been increasingly vocal in their demands for co-location.
The increased trading speed will be achieved through updated network design, and ultra-low latency network equipment. The co-location centre will hold 35 racks for clients’ computers, with power and cooling services through a special air flow management system.
Director of the JSE’s Equity Market Leanne Parsons said: “Clients demand faster execution speeds and exchanges need to offer these in order to compete. Co-location potentially offers huge benefits for our market in terms of volumes and liquidity, which in turn could lead to better price discovery.”
In the first year of the JSE’s use of an electronic trading system in 1996, it conducted 158,000 trades per month, now it averages 140,000 per day.