A Trading Gateway in an Exchange's Colocation: What the Setup Includes and When a Nearby Data Centre or Your Broker Is Enough

Exchange colocation means renting space in the data centre where an exchange runs its trading system. Your trading gateway, the software and servers that send your orders, then sits a short cable away from the exchange. Proximity hosting puts the gateway in another data centre nearby. A third route is to keep sending orders through your broker's connection. The setup adds a rack, cables, the exchange connection, exact clocks, tests before going live and data centre staff on call. Colocation is worth its cost when the time an order takes to reach the exchange changes your trading results.

What is the difference between colocation, a nearby data centre and our broker's connection?

In colocation, your servers sit in a rack, a metal cabinet, inside the building that houses the exchange's matching engine. The matching engine is the system that pairs buy and sell orders. That building may belong to the exchange or to a data centre company. Deutsche Börse's co-location page for its Xetra cash market, read on 20 October 2026, names Equinix's FR2 data centre in Frankfurt as the one “in which the primary Eurex and Xetra back-ends are located”.

Proximity hosting means your servers sit in another data centre near the exchange, linked to it by a network line. The EU's co-location rules, Commission Delegated Regulation (EU) 2017/573, read the same day, also cover “proximity hosting services owned and managed by a third party with a contractual arrangement with a trading venue”. Trading venue is the EU's term for an exchange or another regulated trading platform.

The broker route needs no servers of your own near the exchange. Your software sends orders to the broker, whose systems pass them on and may already sit in the exchange's colocation. The broker holds the exchange connection and runs the risk checks, the limits each order must pass before it is sent.

When is colocation worth paying for?

Distance adds time to every order on its way to the exchange and to every price update on its way back. Colocation cuts that distance to a cable inside one building. The saving matters to strategies that compete on being first. Market making is one example: a firm keeps buy and sell quotes in the market and must update them before others trade against its old prices.

EU law links colocation to high-frequency trading. MiFID II, the EU directive on markets in financial instruments, defines a “high-frequency algorithmic trading technique” partly by infrastructure such as “co-location, proximity hosting or high-speed direct electronic access”. The definition, read the same day on the website of ESMA, the EU's securities markets authority, also requires software-driven orders and high message rates.

A nearby data centre or the broker's route can be enough when your positions last minutes or longer, or when clients place orders by hand in an app. Each step closer to the exchange adds contracts, equipment and staff, so weigh the time saved against what your strategy earns from it.

Moving the server closer does nothing about time lost inside your own software. The order path is the code each order passes through, and its programming language, Rust or any other, is a separate decision from where the server sits.

What goes into a colocation setup?

The rack comes from whoever runs the data centre, with a set amount of power and cooling. Deutsche Börse's page says “Equinix generally provides all housing services like rack space, cooling, power supply and smart hands.” Smart hands, also called remote hands, are data centre staff who do physical work on your equipment, such as swapping a disk.

The exchange reaches your rack through a cross-connect, a cable the data centre runs between your rack and the exchange's equipment. Deutsche Börse delivers “trading/clearing and market data connections up to the customer's rack (via cross-connects provided by Equinix).”

Over the cross-connect, the exchange opens sessions for you. An order entry session is the logged-in connection your gateway uses to send, change and cancel orders. A market data feed brings prices and trades to your servers.

A full colocation setup usually has these parts:

• Rack space, power and cooling for your servers and network switches
• Cross-connects to the exchange, plus carrier lines to your office or other data centres
• Order entry sessions and market data feeds, through your own exchange membership or an exchange member
• A time source that keeps server clocks close to official time
• Remote hands on call, and monitoring that alerts your staff when a session drops
• A plan for a failed rack or line, from a second site to a way of cancelling open orders

Rack space can run out. Under the EU co-location rules, each trading venue that offers co-location must publish “the procedure to allocate co-location space”.

Do we need exchange membership, or can we connect through a broker?

Only members, also called participants, connect to an exchange in their own name. In the EU, MiFID II lets regulated markets, one legal type of exchange, admit investment firms, banks and other persons who meet conditions, among them “a sufficient level of trading ability, competence and experience”. Membership also means following the exchange's rulebook and arranging how your trades are settled.

Without membership, a member firm can let you send orders under its trading code, the member's identifier at the exchange. MiFID II calls this direct electronic access. If your orders pass through the member's own systems, the directive calls it “direct market access”. When the member's infrastructure is not used, it calls it “sponsored access”, and your own gateway can talk to the exchange directly.

MiFID II requires a regulated market that permits either kind of access to ensure that “the member or participant retains responsibility for orders and trades executed using that service”. In the US, SEC Rule 15c3-5 makes the broker that gives a customer access to an exchange run risk controls.

How accurate must the clocks on our servers be?

Your systems record the time of each order and trade. Commission Delegated Regulation (EU) 2025/1155, read the same day, requires exchanges and their members to synchronise their clocks with UTC, Coordinated Universal Time, the world's reference time. Its clock rules have applied since 2 March 2026, when they replaced Delegated Regulation (EU) 2017/574.

Under Delegated Regulation (EU) 2025/1155, the required clock accuracy depends on the kind of trading. For activity using a high-frequency algorithmic trading technique, its table allows a maximum divergence from UTC of “100 microseconds”, with timestamps recorded to a tenth of a microsecond or finer. A microsecond is a millionth of a second. Where a person agrees each deal, as in voice trading or negotiated transactions, the table allows one second. For other kinds of trading, ask the exchange which accuracy it expects from members.

Members must also prove their clock accuracy. Article 16 of Delegated Regulation (EU) 2025/1155 requires “a system of traceability to UTC” and a review of its compliance “at least once a year”. The co-location price list on Deutsche Börse's page includes a Deutsche Börse “Time Service (PTP)” add-on and Equinix “Roof space for GPS Antenna”. PTP, the Precision Time Protocol, carries exact time over the network.

What testing comes before the first live order?

Commission Delegated Regulation (EU) 2017/584, read the same day, says trading venues “shall require their members to undertake conformance testing”. The tests come before a member first uses its access or trading system and before any substantial update to them. Conformance testing checks that your software works within the exchange's technical rules.

Article 9 of Delegated Regulation (EU) 2017/584 says the tests must check “submission, modification or cancellation of an order” and “the connectivity, including the cancel on disconnect command, market data feed loss and throttles”. Cancel on disconnect means the exchange cancels your open orders when your session drops. A throttle is a limit on how many messages you may send in a given time.

The London Stock Exchange's MIT501 Guide to Testing Services, issue 22 of 3 February 2025, read the same day, says: “Before connecting to the Live Service, customers are required to certify that their software applications fully conform to London Stock Exchange's Millennium Technical Specifications.” Customers must certify again after changing the software “in any way that directly impacts a London Stock Exchange interface”.

At the London Stock Exchange, the application conformance tests cover how the software talks to the exchange. Testing the strategy stays with the trading firm: the exchange's MIT501 guide says it “will not perform conformance testing of client algorithms” and requires firms to self-certify that their algorithms have been tested.

Article 9 of Delegated Regulation (EU) 2017/584 says the venue delivers the conformance test report “to the actual or prospective member only.” Where a gateway was tested under a member firm's access, the engineering firm that built it can point you to that member, and the member decides what to share.

Who does which part, and how do we check an engineering firm's colocation work?

Even at one exchange, the work splits across companies. On Deutsche Börse's page, “Housing contracts are concluded between Equinix and the respective customer”, and the exchange group “is not involved in the contractual relation between its members and Equinix.” Lines to other sites usually come from network carriers under separate contracts.

Your member firm or broker grants access and answers for the risk controls. A clearing member, the firm that clears your trades through the exchange's clearing house, may be the same company or another one. The gateway and its tests can come from a software firm, while your own staff or an operations provider watch the system each trading day. Write down who owns each part before signing.

Put these questions to each party:

• Exchange or data centre: is rack space free in the room we need?
• Member firm or broker: will our orders pass through your systems or go straight to the exchange, and which risk checks will you run?
• Member firm: if the conformance tests run under your name, will you share the report with us?
• Software firm: where does software you built run in colocation or a nearby data centre today, and which parts did your team handle?
• Software firm: which exchanges' conformance tests has your software passed, and with which member firm, so that we can ask that firm for a reference?

Good answers name the exchange, the member firm and the parts of the setup the team handled. Where a confidentiality agreement prevents names, ask the firm to arrange a reference call with the member.

Which costs are paid once, and which come back every month?

Servers, network switches, installation and the gateway software with its tests are usually paid for once, along with any joining fee the exchange charges. The monthly bill covers rack rent and power, each cross-connect, carrier lines, the exchange's connection fees, market data and the staff who watch the system.

The EU co-location rules require each trading venue that offers co-location to publish “the fee structure for each service” and to offer individual services “without any requirement to purchase bundled services”.

The co-location price list on Deutsche Börse's page shows an Equinix “Cross-connect” at 150 euros a month. The Equinix fees in that list carry the note “in January 2023”, and the page says its prices apply only to specific rooms in the FR2 data centre. Fees change, so ask each party for its current list before you build a budget.

Where does amBrain fit?

amBrain builds algorithmic trading infrastructure: order execution, market data and pre-trade risk controls. One line on amBrain's website reads: “Trading terminal development, order management systems, and FIX protocol exchange integration.”

Among the lines amBrain publishes about itself is this one: “A mini-exchange running in production on MOEX colocation.” The line does not describe that system's exchange connection, network, data centre, protocols or testing, or who arranged the colocation.

amBrain has been building software since 2019. It works in three formats: full delivery, a dedicated team, or engineers embedded in your team. Its line on ownership is “The client keeps full ownership of the product and the code, except our reusable components.” If amBrain is on your shortlist, give it the same questions as any other firm.

This article is not a case study and describes no client work. It does not say that amBrain set up colocation or a trading gateway for a client. Nor does it say that amBrain is or was an exchange member or holds any exchange certification or conformance test result.

Deutsche Börse, the London Stock Exchange and Equinix appear as examples from Deutsche Börse's and the exchange's own pages. The article claims no relationship between amBrain and any of them or any network provider. It gives no amBrain prices or timelines and is not legal advice: rules differ by country and exchange, so check them with the exchange and, where needed, a lawyer.