The annual Futures Industry Conference at the Boca Raton Resort & Club is great for catching up with old friends and clients, but each year, new attendees arrive to make their name known. Jim Kharouf sat down with Lilia Severina, collocation and proximity hosting director of Interxion (pronounced Inter-Action), which is based in Amsterdam and went public in January. (The firm announced its first quarterly earnings report on March 23, 2011) Severina spoke about what the firm does in co-location and its goal to bring more U.S. clients over to Europe, where its operations are well established.
Q: Let’s start with who Interxion is.
A: Interxion is a co-location and proximity hosting firm which specializes in capital markets and finance, along side other verticals. The area of capital markets has been very important for us because Europe today has the largest community of participants. Our main facility hosts over 200 capital markets participants in London. We also are a strategic partner with the NYSE Euronext and provide proximity hosting for NYSE which includes their markets that are active in Europe – Arca, SmartPool, Euronext and LIFFE. We also work with the London Stock Exchange and co-located a number of MTFs in London and pan-European MTFs. We also do proximity hosting for BATS Exchange and Chi-X Europe. What sets us apart is that we are in the square mile in the city of London. And having relationships with exchanges since 2002, we have organically grown a base of NYSE Euronext members at our datacenter. Since the MIFID deregulation in 2007, we’ve seen many American firms come over to trade on multiple exchanges. As exchanges opened faster systems, that opened the way for high frequency trading. With our location, we are 237 microseconds away from Basildon, where the NYSE exchange matching engines are. We’re about 6.5 to 12 microseconds from the London Stock Exchange and 46- to 48 microseconds from BATS and equidistant between the NYSE and Chi-X. That makes us unique among firms that engage in statistical arbitrage or futures against the underlying strategies. We also work with brokers who are interested in low-latency DMA. So if you are trader in Chicago, you can drop in equipment in London, have a choice of brokers and carriers, exchanges, market data. You can set up the whole thing in a couple of weeks.
Q: What brings you to the U.S.?
A: We floated Jan. 28 on the NYSE in New York. The U.S. market is very important for us because of the number of firms that do statistical arbitrage and high-frequency trading. Proprietary trading firms represent a growing sector. Europe is still a very fragmented market. Although it isn’t very easy to trade multiple markets, the opportunities are fantastic.
Q: What makes your technology different from other co-location services?
A: We are carrier neutral. We have 38 carriers and low latency is very dependent on carriers because it’s their fiber routes in the ground that physically transport your information. So the shorter the route, the faster it goes. If you have very little choice of carriers, then you fall behind the competition. We also have a lot of processing power, our location and expertise. When we talk to a broker, trader or technology company, we’re in a position to actually consult them as how we could see their business working well in London, or Stockholm or Zurich or Stockholm.
Q: What is the potential for co-location and proximity services going forward?
A: There are still a number of exchanges that want to employ this strategy and a large number of banks that are not in low latency or DMA. There is definitely more space on the brokerage side. In terms of exchanges themselves, we see a lot of action in the FX space. We also see interest from exchanges such as the London Metal Exchange.
Q: Do you see regulation having an impact on your business?
A: The behavior of exchanges certainly has an impact. Depending on the strategy and price structure, it affects how we do business. From a regulation perspective, we have benefited because we allow many firms with very little capital to engage in highly profitable strategies. To buy co-location and data from some of the largest exchanges costs you four times the amount compared to ours at Interxion. Interxion is in a great position now that banks are under pressure to lighten up their balance sheets.