Crypto Terms: Letter C

What is Colocation?

Colocation MEANING:
Colocation - a specialized space in a stock exchange's data center that is shared with other parties, such as high-frequency traders.
1 minute

Let's find out Colocation meaning, definition in crypto, what is Colocation, and all other detailed facts.

Colocation is a term used to describe a shared facility where many individuals can put their IT equipment and specialized hardware. However, colocation in high-frequency trading (HFT) is a term used to describe a specific space within a stock exchange's data center.

The main goal of colocation, in the case of HFT, is to house the computers of HFT traders and companies in the same place where the stock exchange servers are stored. To put it another way, HFT traders benefit from the fact that their computers and the stock exchange servers are very close to each other.

Because of that, traders have access to current market pricing ahead of the general public. However, the difference is only in milliseconds. Though despite that, companies still spend a huge amount of money on such a benefit.

In the last decade, stock traders started building larger data centers near major stock exchange computers. This is probably happening due to the increasing demand for colocation services.

Though apart from trading, colocation is also used to talk about specialized colocation centers. Such data centers rent out storage, bandwidth, professional hardware, and other similar services. For institutions that demand extensive security protections, these data centers include cages, open racks, and private suites.

Lastly, it should also be noted that colocation is really useful for small companies. This is because colocation provides them with an essential infrastructure, which means that companies don't need to start their businesses from nothing.