I heard words to that effect numerous times while Equinix was building what would become New York’s most important financial services ecosystem.
Some felt it was nuts to construct our NY4 data center in 2007, with plans to make it the base of this ecosystem, especially since our existing New York facilities weren’t all full. And potential participants in our developing electronic trading ecosystem flatly told us they would never move critical trading infrastructures from their own facilities next to their competitors inside Equinix data centers.
But they did. Today, Equinix has more than 360 financial services firms in our New York metro. While we may have seemed a little crazy back then, we were on to something.
In a couple weeks, we’re opening up our NY6 facility, our latest expansion in New York. It’s a chance to reflect on our critical New York metro and look back on the start of that financial services ecosystem, which continues to be a key driver of growth in New York.
Before I joined Equinix, I operated a global electronic trading network, and I remember touring CH1, the Equinix facility in Chicago that hosted one of the world’s first financial services ecosystems. It was 2004 and I was blown away by the efficiency of this simple, powerful model that brought networks and financial services firms together in a neutral facility to exchange traffic and do business. I signed on as a customer and met Equinix co-founder Jay Adelson shortly afterward. I told him, “If Equinix can apply this Internet peering model to the electronic trading industry in key global cities, you will change the way capital markets work.”
I got the chance to see firsthand if that prediction would come true when I was hired in 2007. Equinix had just built NY4, countering doubts about the expansion with a simple rationale: New York was a huge hub for global telecommunications and digital content, two of our key markets. We either needed to make a major investment there or leave.
NY4 opened shortly before the global financial crisis in 2008, but the timing was right for Equinix. Most financial institutions didn’t have the available capital to invest in their own multi-million dollar data center facilities during that challenging period, so colocating inside Equinix was a way to economize.
At this time, I was focused on building the electronic trading ecosystem. I started by literally mapping on a grid every segment of the industry – the information sources, the brokers, the asset managers, the execution venues – and looking for interdependencies. Then we started to go after companies we knew were critical components in this vital digital supply chain.
As I mentioned, it was a tough sell. Trading systems and software are among the most prized possessions of any capital markets company, and the idea of moving it off-premises, literally across the aisle from your fiercest competitors initially seemed ridiculous to many. But the industry was changing.
More endpoints and information sources were developing in the financial markets, and there were increasing numbers of counterparty firms that needed to interconnect. Not only were there more endpoints in the financial markets but the data rates and bandwidth required to connect was doubling every 18 months. The cost of doing business was staggering. Connecting to everyone inside a data center gave companies the ability to flatten this nearly vertical spending trajectory. It was an advantage they eventually just couldn’t argue with.
The ecosystem really gained traction around 2009 and took off in 2010 after the first registered exchange (Boston Options Exchange- BOX) went live in Equinix New York. Today, nearly all the major U.S. exchanges have some type of presence with us in New York.
The advantages of being central to dozens of information sources, counterparties and execution venues are clear, but the fast, secure interconnection to the ecosystem’s varied and critical participants remains our biggest draw. So our story in New York has similarities to the Equinix story everywhere. With NY6, we get to add another chapter.