High-frequency flap over CME’s Aurora data center

CME Group is considering closing its main data center in Aurora, Illinois as part of the cloud services deal it signed with Google in 2021, despite fierce opposition to the move among Chicago-based proprietary trading firms (PTFs).

Late last year, the exchange group privately asked some PTFs where it should locate its data center if it decided to leave Aurora, around 35 miles from downtown Chicago. The question did not go down well with local firms, which have spent small fortunes connecting to the facility.

“The answer is prop traders don’t want to move,” says a senior executive at a large Chicago-based proprietary trading shop.

Since then, the exchange group has been tight-lipped about its plans for the data center, further alienating the PTF community in Chicago.

“The industry is furious,” says a market structure expert at a second proprietary trading firm in Chicago. “It’s causing a lot of frustration.”

Terry Duffy, chairman and chief executive of CME Group, met with the Futures Industry Association’s Principal Traders Group at the FIA Boca conference yesterday (March 14) to discuss the sector’s concerns. According to a source who attended the meeting, Duffy told the group the exchange had no current plans to move its data center out of Aurora.

“They realized it can’t be done at this point,” this person says. “They investigated it and seemed satisfied” with the current facility in Aurora.

The clouds over Aurora only lifted briefly.

Duffy referenced the meeting on a panel at the conference later in the day, offering a more nuanced version of CME’s stance. “One of the things I said to the PTG, or Principal Traders Group, is the last thing I’m going to do is disrupt markets,” he said.

Speaking with Risk.net after the panel, Duffy denied he had ruled out relocating the data center. “All I said was we wouldn’t do anything that would disrupt markets. It would be inaccurate to say we have decided anything,” he said.

Virginia calling?

In November 2021, CME agreed to move its technology infrastructure to Google’s cloud. As part of the deal, Google made a $1 billion equity investment in CME. The exchange group’s migration to the cloud is being led by Ken Vroman, a 23-year veteran of the company, who was named its chief transformation officer when the deal with Google was announced.

Some of CME’s data and clearing services have already moved to Google’s cloud. Last year, Phil Moyer, senior vice-president of strategic industries at Google Cloud, told WatersTechnology that CME had committed to moving all systems that do not require low-latency functionality to its cloud.

Chicago-based PTFs say relocating the Aurora data center would make entire networks of microwave towers and fiberoptic cables redundant, forcing them to invest in new infrastructure.

While CME has said nothing publicly about a move, two sources say a Google facility in Virginia has been mentioned in industry circles as a possible future location. The market structure expert says some PTFs have already started scoping out network infrastructure near the site. If a move is announced, it would set off a bidding war among prop traders for co-location space and land adjacent to the new location.

“Everyone’s rushing to see what you can buy and what you can do,” the executive says. “A new cell network will need to be set up.”

The head of a third proprietary trading firm in Chicago says many smaller shops would struggle to cover the cost of setting up new network infrastructure to continue their trading activities.

The senior executive at the large Chicago-based proprietary trading shop believes a relocation is unlikely in the near term. “We just wish they would come out and say that,” this person says.

After a day of quickfire meetings and public statements, the future of CME’s Aurora data center remains uncertain. CME’s lease on its facility in Aurora is understood to run for another seven years.

Other exchange groups that have struck deals with cloud computing giants face similar questions. Last December, London Stock Exchange Group signed a decade-long strategic partnership with Microsoft worth around $5 billion. In a similar vein to CME’s deal with Google, Microsoft acquired a 4% stake in LSEG as part of the transaction.

Meanwhile, Nasdaq has started moving its markets business to Amazon Web Services, starting with the MRX US options exchange.