Just Hubbing It: Why the Global Financial Industry Is Converging on Equinix

Companies recognize that consolidating their digital supply chains within shared data centers allows them to cut costs while simultaneously enhancing their ability to exchange information and transact with each other. Also, shared data centers attract a diverse mix of competing service providers, including network and cloud service firms, giving companies the agility to choose the optimal solution at the most competitive price as business needs and technology trends continue to evolve.

Digital business ecosystems – dense clusters of companies with shared commercial interests – are rapidly developing within Equinix data centers. Nowhere is this digitally integrated supply chain model more evident than in the financial services industry, which has converged on Equinix to support everything from electronic trading to back-office IT functions.

High concentrations of financial services companies have moved to Equinix data centers located in the world’s top financial markets. The global financial industry is banding together within Equinix for four main reasons:

  1. High-performance connectivity – In Equinix colocation facilities, companies can directly connect to one another via a local cross connection. This dramatically increases network speed. For instance, it takes about 50 milliseconds to contact a server over public networks; via direct connections, it takes a mere 2 to 3 milliseconds. For financial operations that tolerate no time delays (e.g., electronic trading), the network performance advantages of collocating in Equinix data centers are a no-brainer.
  2. Reduced data communications costs – Network charges and connectivity fees are a significant recurring cost of data center operations. They’re also usually an escalating cost, because the amount and rate of data being transmitted tend to increase over time. Companies colocating in a network-rich data center can save on recurring connectivity charges by provisioning a network service connection into that-in a carrier-neutral facility-is typically subject to competitive bidding by many prospective providers. Redundant network lines that customers may need for data backup and business continuity are also bid upon by multiple providers. Financial services firms can save even more on their data links by using cross-connects to communicate with business partners and customers colocated in the facility. Cross-connects are high-throughput cables linking two companies’ servers so they can exchange data directly. Cross-connects provide unlimited bandwidth for a flat fee at a far lower cost than the leased lines or usage-based connections financial firms would otherwise pay to connect to electronic exchanges and other business partners.
  3. Future-proof flexibility – Banks and exchanges continue to merge, and new regulations introduce compliance requirements that must be addressed through new procedures and processes-often with the help of new intermediaries and service providers. Companies must look for more efficient ways to connect to an ever-changing roster of providers, counterparties and customers to keep up with changing regulations and business needs. It’s almost a certainty that the business partners and connectivity options financial services firms need to stay competitive now and in the future can be found in Equinix colocation centers, which already house more than 800 companies in the financial services industry.
  4. Streamlined connections to partners – Financial services firms must connect with many different partners to execute trades and access market information and news sources. Many of these processes are time-sensitive, so companies in the industry have set up highly reliable connections to each other. While a series of point-to-point connections (a distributed model) works when dealing with only a handful of partners, it becomes unwieldy and costly when the number of partners proliferates. The diagram on the left in Figure 1 below illustrates the complexity of maintaining a web of individual connections with partners.

Within Equinix data centers, financial services firms have moved toward a new, more efficient model for connectivity: the centralized hub (see diagram on the right in Figure 1). In a hub model, companies don’t set up individual network connections to each other; instead, they all link directly inside a central exchange point (the hub).


Figure 1: The Hub Model Gives the Financial Industry the Ability to Scale in New Ways



Equinix data centers are hubs for the global financial community. Because more than 800 financial services organizations-including 100+ exchanges and trading platforms-colocate in Equinix facilities, financial companies can connect to any of their industry colleagues through “cross-connects” to dramatically reduce the number of network circuits needed for financial services firms to access and expand their business ecosystems. They only need to provision and manage ultra-reliable in-facility connections. And, as described above, the direct connection is very cost-efficient, compared with connecting through traditional communication networks.

A hub model also increases the reliability of a network, as the fiber-optic connections and all connected parties are wholly contained within the data center-there’s no risk of having a utility company’s backhoe sever network cables. And Equinix colocation facilities across the world offer an average 99.999% uptime, maximizing the availability of customers’ data center services.

With state of the art facilities 22 of the world’s leading financial centers, Equinix is positioned to provide reliable, flexible data center solutions to companies in the financial services sector. To find out more about which Equinix data centers could be your digital hubs in the global financial services industry, please contact financial@equinix.com.