As Asia’s Markets Come of Age, Market Ecosystems Need to Keep Pace

There’s no question that trading firms are enticed by Asia. China’s continued expansion and status as a global economic powerhouse is a dominant factor, but beyond that there is a general sense that Asia offers additional opportunities for trading firms, especially when compared with well-trodden European and US markets.

The announcement of Pico’s new colocation facility and direct connectivity to Hong Kong Exchanges and Clearing Ltd (HKEX) is just the latest sign that demand for access to Asia is on the rise. Catering for this need requires state-of-the-art data facilities and a level of service that, hitherto, have not been found in Asian markets.

What is critical to the success of any colocation facility is the ability of the host to work with vendors, market participants and even other venues to build a strong market ecosystem.

“What we’re trying to do is build an Asian hub for trading Asian markets with a variety of providers,” said Chris Lee, Managing Director, Global Client Development at HKEX, “Data suppliers, telecom and network providers, software firms and hardware vendors are among the types of companies that populate HKEX’s ecosystem in order to ensure that it thrives.”

The idea of building a better ecosystem was one of the drivers behind HKEX and Pico teaming up in the first place. HKEX, in addition to its strength as a major market centre in its own right, offers a unique gateway to China through its Stock Connect programme. Pico, meanwhile, already has a powerful ecosystem thanks to its reputation for service and strong client loyalty.

But what does better service mean in terms of colocation? To some, a colocation facility may sound like a highly specialised warehouse, a place where a lot of servers are lined up for a special purpose under very special conditions. But colocation involves much more than racks, servers and cables. Every market participant or vendor has unique requirements. The colocation space, after all, is one of the most important nodes in a trading firm’s network.

For Pico, the service factor starts with having the right people on the ground. For instance, as a provider, we maintain a large team of multilingual staff based in Asia ready to work with clients to ensure that when they want to build up their presence in a colocation facility, they have whatever they need. That contrasts with other providers which outsource the service component.

HKEX also sees a client-centric approach as key. “We want to offer our clients a full-service ecosystem, for products and technology,” says Chris Lee. That approach even extends to other exchanges. “We have an open policy to allow other exchanges to locate hubs in the HKEX colocation centre.”

For many international players, Stock Connect is a simple way to start trading China. The new facility means not only that will it be easier for these participants to gain access, but also that they will have a much larger range of partners to work with, whether that means data supply from Pico or partnerships with any of the other firms in the ecosystem.

Hong Kong complements a large number of Asian colocation centres for Pico, including Tokyo, Taipei, Bangkok and Manila. But the HKEX facility represents a step up in terms of what will be on offer for its clients, being one of only a few exchange-operated Tier 4 data centres anywhere in the world. These are centres that are designed to host mission-critical systems. They have completely redundant subsystems and can run indefinitely on their own power supplies in the event of outages.

The success of any market ecosystem ultimately comes down to chemistry and how well all the pieces fit together. In this case you have the highest level of technical excellence, an inclusive approach by HKEX, superior service quality and ease of access to the China market. For any trading firm that recognises the opportunities that Asian markets offer, that makes for a pretty powerful combination.