The New Jersey region continues to be fertile ground for server farms and expansive fiber optic networks. A demand for robust IT resources with close proximity to the New York metropolitan region has spurred an arms-race among Wall Street institutions that trade at nanosecond intervals. Latency, the delay experienced along digital transmission routes, is the variable requiring data centers to locate as close as possible to the trading ‘floor.’ This phenomena, know as ‘Proximity Trading,’ establishes a unique morphological contingency for the financial sector in today’s global city. Data Centers proliferate in dense pockets near the markets they trade with and often inhabit valuable commercial real estate, once filled with industry executives and investment firms. This displacement of human resources in favor of Automated Market Makers is truly perplexing for the evolution of the contemporary city.
High Frequency Trading (HFT) data centers differ from their Cloud supporting cousins in two ways. First, the HFT data center functions as a super computer. Similar to mainframes of the Cold War era, they combine their assets to become a high-volume, rapid response hot-rod, rather than a redundant storage and back-up array. In addition to speed, the coefficient of lag or latency is regarded as a prerequisite for attaining a competitive edge in the HFT game. Co-locating at the market or as near as possible to it has limited and altered the footprint of the HFT data center. Here, proprietary algorithms and database statistics on market behavior are hosted on virtual real estate, priced at a premium. Allegations of preferential treatment for firms that are allowed to lease this limited server space abound in the industry.
If the priority for High Frequency Traders is rapid response times, then why have they announced leasing server space in Jersey? Security and reliability are good for redundancy and back-up, but Jersey is a millisecond too far when competing for speed with downtown data centers. Therefore, is Jersey’s Fibershed an indicator that the real engine of nanosecond liquidity is not in Jersey but remains in Manhattan? Or, has the market pipeline moved to black boxes in Jersey, where the real transactions take place? Are markets in Manhattan merely storefronts of a disembodied trading forum that have moved, both physically and virtually, to a model of digital capital combustion?