Four of the world’s largest exchanges have told the Commodity Futures Trading Commission that while they broadly welcome its proposal to regulate colocation services, they have several concerns.
In comment letters to the CFTC this week, executives from CME Group, Intercontinental Exchange, NYSE Liffe and Eurex each said that they broadly agreed with the policy on colocation – the practice of customers siting computers physically close to an exchange’s servers, to reduce transaction times.
However, CME and ICE said the regulator should refine from overbearing regulation, while NYSE Liffe said it should aim to regulate all vendors of colocation.
This is the first time the US authorities have tried to regulate colocation services. The practice offers substantial reductions in latency, but is often expensive, and so has been criticised as unfair – a way for those with the deepest pockets to gain an advantage. Exchanges have always maintained that...