The Exchanges Now Bringing HFT Breakfast in Bed! Woo Hoo!
The JSE (Johannesburg Stock Exchange) is upping the Stock Exchange game by announcing that they will create their own European-based trading hub 5,000 miles from their domestic market! They will use infrastructure from the UK firm, Fixnetix, with their strategy to focus on high frequency traders and products outside the plain vanilla cash equity market in South Africa.
Why is this significant? The JSE is not only following in the server farm business pioneered in the United States, it is upping the game by bringing breakfast to the beds of the HFT players where they mostly reside. This should be a huge business, and we can see it undertaken by many other global exchanges. I mean why co-locate in India, Brazil, Bahrain, Cambodia, Calcutta, Jaipur, Iraq, Amman, Kazakhstan, Beirut, Bulgaria, or Montenegro when they can come to you!
Exchanges in the United States are mature and boring (just ask the NYSE/Deustsche Bourse). Equity and bond trading is mature and boring (unless it’s May6th). Operating an exchange for the exchange of investment capital is mature and boring. This is why Exchanges everywhere are focusing on derivatives, new games, new action, and new breeds of hyper-traders. They are running businesses that need revenue and profits, and not capital exchange highways. If colocation and data feeds are where the money is, then they will be there. We guess the issue becomes, at some point:
What is the purpose of a stock exchange supposed to be exactly? Is a healthy capital-raising stock market important for economic growth? Is capital raising and exchange by investors important enough to be safeguarded and nurtured by a higher authority than one exchange’s top shareholders?
Capitalism, survival of the fittest, and profits are all worthy and important. But perhaps we should all realize that too much breakfast in bed can have other effects as well.