With Jeffrey Britell, Senior Vice President – Global Network Services, IPC
What financial exchanges are contemplating moving jurisdictions, and why?
It’s public knowledge that financial exchanges on both sides of the Atlantic Ocean are at least discussing the possibility of relocating to new jurisdictions, albeit for different reasons. In the United Kingdom, exchanges are concerned about the regulatory implications of “Brexit,” and have said they’re researching the process of shifting operations to mainland Europe. In the United States, financial transaction taxes are being debated at the state level currently, such as in New York, and exchanges are considering moving should those taxes be implemented.
Can you explain your role is at IPC, and how it gives you perspective on the issue of exchange relocations?
IPC provides one of the world’s largest financial trading ecosystems, and as part of that we connect professional traders to exchanges — equities to commodities and more — in over 60 countries around the world. With most of the major global exchanges connected to our platform in one form or another, we are in the unique position of having visibility into the broader market forces driving their activities. As Senior Vice President of Global Network Services at IPC, I oversee IPC’s global network operations teams, which manages all of our exchange relationships.
How difficult would it be for an exchange to physically relocate?
It’s easier today than it would have been, say, 20 years ago. These days, most exchanges process their transactions in off-premises data centers; for example, the exchanges based in New York use facilities in New Jersey to handle almost all of the buying and selling electronically. These off-premises data centers don’t have to be built or run by the exchanges, either. It’s very common for them to use “colocation” facilities, meaning the actual space is built, networked and maintained by a third party. The exchanges then run their environments within those spaces.
So, it’s easier in today’s environment for an exchange to move, as its backbone — the trading — can be shifted electronically to another data center. That’s not to suggest there’s anything easy or simplistic about relocating some of the most complex technological environments in the world. Any migration would need to be approached with great care given the vast amounts of money being transacted, but with the majority of the markets partially or fully electronic, the process of establishing a new trading environment can be done more quickly than in years past.
What might an exchange look for in a new jurisdiction?
The technological element is not the top concern, as there are many existing data centers around the U.S. and Europe that could meet an exchange’s needs. The chief consideration is probably on the policy front: regulatory stability, and a favorable tax regime. Environmental concerns are also important. Regions that face recurring weather phenomena like hurricanes or earthquakes might not be ideal, for instance, lest the centers be damaged and become inoperable. Also, some exchanges might opt to build their own data centers, and then cheap and plentiful land, with access to stable power, would also be a factor, as data centers can physically be quite large.
Have any exchanges inquired with IPC about moving to new jurisdictions?
I can’t divulge any conversations IPC may, or may not, have had with exchanges about facilitating a move. As you would expect, should an exchange decide to relocate, that would be a closely guarded secret. But, IPC is uniquely situated in that we are a connectivity facilitator, and so could in fact help an exchange move from a technological standpoint.