South Africa's Johannesburg Stock Exchange (JSE) is to offer co-location services to its members and their clients.
Co-location takes place when market users place their routers and servers as close as possible to the exchange trading systems, even within the same data centre, to reduce the distance an order must travel with the aim of minimising order round trip latency and reducing execution risk.
The introduction of co-location services will be made possible by the JSE's implementation of trading technology company MillenniumIT's trading software, Millennium Exchange, and the associated relocation of the equity market trading engine from London to Johannesburg in the first half of 2012. The exchange is also upgrading and enlarging its existing data centre to enable co-location.
In the coming months the JSE will engage with market users, picking elements from international models to define the offering. The exchange may also introduce additional checks and balances on its existing automated order entry and direct market access approval processes to ensure consistency with the current regulation that the JSE offers.
“In our experience whenever our technology evolves, higher volumes follow,” said Leanne Parsons, COO and head of the equity market at the JSE. “International evidence suggests that when exchanges introduce co-location they attract a new segment of clients, boosting levels of algorithmic trading activity.”