Firms that co-locate inside the datacenters of some of Europe’s largest exchanges are looking at a potentially busy period of datacenter migrations ahead—whether they know it’s coming or not.

Euronext is looking to move its datacenters from Basildon, outside London, to Bergamo, Italy. In a note to shareholders, Euronext said the group will analyze the feasibility of transferring its datacenter to Italy by 2024, when its contract with the provider in Basildon expires.

Additionally, sources tell WatersTechnology that the Swiss Stock Exchange (Six) could also be looking at a datacenter move as an option to consolidate its own assets along with Bolsas y Mercados Españoles (BME), which the former acquired in June 2020. A Six spokesperson says it is too early for the exchange to talk about moving either of its datacenters, and that a decision has not yet been made. However, they did confirm that Six is looking at how to integrate its platforms across the two groups. 

The latest to confirm a datacenter rethink is London Stock Exchange Group (LSEG), which is moving its primary datacenter out of the City of London to London’s Docklands area next year. An LSEG spokesperson has confirmed the move with WatersTechnology saying that the exchange is “consulting with customers to support them through this process,” but declined to provide specifics around the migration. The move was first mentioned in an A-Team blog post in October 2020, but had not yet been confirmed by LSEG.

LSEG operates its own primary datacenter near Liverpool Street, but sources say the move to the Telehouse facility on the Isle of Dogs will allow the company to more easily scale up to meet client demand. One executive at a low-latency service provider that has been briefed on the project says the migration is intended to occur as a “big bang” switchover, meaning the old and new sites will not operate in parallel, but that once all the hardware and connectivity has been set up at the new site, the switchover will occur overnight, in the second half of 2022, and the old datacenter will be closed.

There’s a significant capital expense component to this. There’s a lot of money you have to spend on new switches, new servers, and you have to basically build out a mirror footprint of what you currently have in place, and you have to have both of them in place and running so that you’re ready for when that switch occurs.

Senior executive

Additionally, LSEG will provide access to the new site later this year to allow clients—including network carriers, market makers, brokers, and other third parties—to begin preparing for the switch, says the source. While the two sites are only five miles (8 kilometers) apart, it may still cost some firms a sizable amount of money to migrate, according to several sources spoken to for this story.

Market makers and brokers—which have businesses dependent on low-latency market data—co-locate within exchanges’ datacenters to be close to their matching engines. These firms will need to build or work with third parties to develop duplicated hardware setups at the old and new sites, including rented space and connectivity. The same will apply to third parties that provide low-latency solutions or co-location services, as their business model involves buying up racks within a datacenter and renting them to individual clients.

“There’s a significant capital expense component to this,” the executive says. “There’s a lot of money you have to spend on new switches, new servers, and you have to basically build out a mirror footprint of what you currently have in place, and you have to have both of them in place and running so that you’re ready for when that switch occurs.”

Further muddying the waters is LSEG’s acquisition of Refinitiv, which houses its datacenter in the Docklands Technical Center. Sources say it would make sense to host both LSEG and Refinitiv in one location. The exchange spokesperson could not offer any information on whether it plans to also upgrade these sites or migrate the Refinitiv datacenter to the new LSEG’s primary site.

The spokesperson also says that customers of the exchange were notified of the move at the end of last year. However, several sources spoken to for this piece, who work with the exchange operator, say they were not made aware of LSEG’s migration plan.

Moving pieces

While LSEG’s move is definite, Euronext is still on the fence, and Six, according to the spokesperson, is still analyzing its datacenter strategy after the BME acquisition. But if all these shifts do end up playing out—in addition to the confusion over the Refinitiv piece—it could create awkward timeframes for many market participants, with each project triggering separate migration-related expenses.

Stephane Leroy, chief revenue officer and co-founder of QuantHouse, a market data, and algorithmic trading solutions provider, says this will put intense pressure on third parties, like network carriers, to juggle the multiple migrations over the next few years.

“Depending on what type of datacenter is selected, and the type of carriers who will provide the different connectivity, and so on, they could face a bottleneck because if they are used to dealing with a certain number of clients at the same time—or a certain workload, on average, per month—and you have the entire worldwide financial community asking them for the same service during the same time window—that’s very difficult,” Leroy adds.

Similarly, one head of product at a large broker-dealer says timing is the main issue when it comes to the LSEG migration. While setting up space, switches, and connectivity within a datacenter isn’t a new concept for a large sell-side firm, they say there still needs to be enough notice given to all the carriers and third parties to prepare.

“I would say it’s a year-long job, really, with the carriers starting off,” they say. “You hope they have received six months’ notice by that time and they were able to [start making preparations], but probably from start to finish, a year is about as quick as you could do it.”

And these migrations require the allocation of time and resources so as to avoid any service disruption to clients. And there are still Covid-related challenges in place, such as remote work and social-distancing mandates.

A datacenter migration for a major exchange can be especially disruptive because of the varying moving pieces involved.

“It’s a frustrating situation for everyone when exchanges change their infrastructure, unless there’s a great improvement,” says Alina Karpichenko, head of low-latency connectivity and infrastructure at Avelacom. “Changes can be expensive and complex, and can cause problems for market participants and exchanges.”

On top of the hardware costs, firms will also have to coordinate with partnering data vendors and other third parties to avoid any disruption to trading and datafeeds. Additionally, systems will need to be fully configured and tested long in advance of the cutoff deadline.

“Moving to another datacenter that’s already set up isn’t free,” says Virginie O’Shea, founder, and CEO of Firebrand Research, which specializes in capital market research and advisory services. “There’s an amount of duplication that goes on there, and it’s not without risk as well, in terms of setup—especially this year, given that we still have remote working going on.”

So it is that LSEG will have to go about explaining to market participants the need for this move at this time. The executive at the low-latency provider familiar with the move says the LSEG’s decision was driven by a need to modernize its datacenter, which today sits within an old facility with limited space to scale operations.

The product head at the brokerage firm also says another likely issue with the current site is access to a reliable power supply. In evaluating the new site, they say, LSEG would have likely considered several key costs: the location, the building itself, the cost/complexity of constructing a datacenter within it, and the building’s power distribution and cooling system.

But the move can be even simpler than that. Today, the exchange group’s primary datacenter is located around Liverpool Street, in the heart of the City, one of the most expensive real estate locations in London.

“It’s some of the most valuable, underdeveloped real estate in the city,” says the broker. “So, if you are sitting on an asset that’s worth a few hundred million pounds—and maybe a bit more than that—you might want to move it.”