Colocation

What Is Colocation?

Colocation (or Colo) generally refers to the creation of a shared facility for storing many people's or enterprises' IT equipment and specialized hardware. For example, colocation in high-frequency trading (HFT) refers to a dedicated facility within a stock exchange's data center. 

Its primary goal is to house HFT traders' and firms' computers in the same building as the stock exchange servers. As a result, HFT firms and traders can receive current market pricing before the rest of the public. 

Despite the difference being of the order of nanoseconds, HFT firms frequently spend millions of dollars for such an edge. In other words, high-frequency traders use colocation to obtain an edge by having their computers physically close to the stock exchange servers. 

How Colocation Has Gained Popularity

Colocation has grown in popularity over the last decade, giving rise to a new type of business. According to others, the increasing demand for colocation services explains why stock traders are building larger data centers near significant stock exchange computers.

For example, the former New York Stock Exchange (NYSE) structure occupied around 4600 square feet. The new data center, on the other hand, is approximately 39800 square feet in size, making it nine times bigger than the former one.

Further Understanding the Concept of Colocation

Apart from the trading environment, colocation can also refer to specialist colocation facilities (also known as carrier hotels). These are data centers where you can rent office space, professional hardware, bandwidth, and many other IT services. This particular service is available not just to other businesses but also to private customers. 

For institutions that demand extensive security protections, these data centers provide cages, open racks, and private rooms. Lastly, colocation is a great alternative for smaller businesses since it gives them the infrastructure they need without the need to create everything from the start.