Colocated Virtual Machine

June 22nd, 2015, 11:15 PM

I saw a company offering what is called a Colocated Virtual Machine (CVM). The idea is lets say I'm in a geographically distant area in relation to the physical exchange that I trade for example CME. What the (CVM) supposedly does is it allows you remote access to another computer that is located close to the exchange allowing you to trade with lower latency. Its taking a shortcut in a sense.

In theory this makes sense. Instead of my Buy trade signal traveling from lets say California all the way through miles of wires until it gets to the CME and is paired with a seller, a (CVM) allows my trade to be shot out from a location closer to the exchange beating the California order to a seller which I need in order to buy.

But I wonder, what is the delay in the remote access, if I'm in California remotely controlling a computer in Chicago, how long is the delay from when I click the Buy button to when the Chicago computer executes the Buy order? Is a significant amount of time really being saved using a (CVM) or is this just a waste of time from the prospective of a high frequency trader or an individual scalper who relies on the speed of order execution.

I think it is a cool idea and wonder if any of you guys/girls have tried it and noticed an advantage or not.

June 23rd, 2015, 05:24 AM

Your mouse click event will take 120 ms to 150 ms to Chicago, so it's not really making sense for 100% discretionary traders. If you use some kind of automation in your discretionary trading, like locally managed iceberg orders, MIT, dynamic stops/targets, whatever logic managed by you own trading platforms, then it make sense (for speed purposes, the reliability is another aspect).

There are already a lot of threads about this on nexusfi.com (formerly BMT), one of the older one might be this one.

Colocated Virtual Machine

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Colocated Virtual Machine