The Johannesburg Stock Exchange (JSE) on Monday successfully launched its colocation centre, which will allow JSE clients to place their trading equipment in the JSE data centre and enable faster access to all JSE markets.

The facility, which is located on the JSE premises, would provide clients with the lowest latency connectivity for trading and the receipt of real-time data, enabling a roundtrip latency of 150 microseconds (μs) compared with the existing 2 550 μs it currently took for Sandton-based clients.

The pricing of colocation would be the same for all clients using the facility.

“Clients demand faster execution speeds and stock exchanges need to offer this to remain competitive. In addition to improved trading speeds and updates to market data, which will allow for enhanced response to market movements and deployment of new trading strategies, colocation also reduces the cost of bandwidth for clients.

“It also improves trading resilience and reduces the client’s dependence on network providers. Apart from the benefits to clients, colocation will open up a new revenue stream for the JSE,” commented JSE Equity Market director Leanne Parsons.

She noted that demand for the service had emerged from JSE members, their clients, data vendors, managed service providers and shared infrastructure providers, while the majority of international demand originated from firms based in the UK.

JSE chief information officer Riaan van Wamelen added that the centre would initially house 35 hosting units and its design was based on a Tier III design, which aimed to conserve efficiencies in energy and cooling.

“The JSE’s colocation centre levels the latency playing field for members, especially those located far from the exchange. It has been built on lessons learnt from other markets, with a nonexclusive hosting unit leasing policy and the same public-data feed available to all clients, whether colocated or not. 

“Faster trading has measurable beneficial impacts on a variety of core market quality metrics, including tighter spreads, increased liquidity and more efficient price formation, among others, for JSE clients. Faster trading speeds have demanded that exchanges, the JSE included, develop new risk-management practices to enhance the integrity and stability of the market,” stated Parsons.

To accommodate the colocation capacity requirements, the existing equity market trading solution, powered by MillenniumIT software, had been upgraded and the entire market would now benefit from an improved matching engine speed of about 100 μs.