Ask people which is the most important structure that keeps the US capital markets humming day after day, and most will likely erroneously say the New York Stock Exchange, which however over the past decade has transformed from its historic role into nothing more than a TV studio for financial cable networks.
No, the real answer of what the most important building if for US capital markets, and not just stocks, but all assets classes, as under its roof on a daily basis electronic trades representing many trillions of dollars’ worth of equities, derivatives, currencies, and fixed-income take place, is the Equinix NY4 data center, located at 755 Secaucus Road, in Secaucus, NJ 07094.
This, as Bloomberg puts it in its fascinating profile of this particular structure, "is where Wall Street actually transacts."
Behold what the new trading floor looks like: This view from a catwalk shows some of the miles of fiber-optic cable that connect to machines below.
The first thing that any entrant in this giant, semi-refrigerated warehouse containing millions of servers will notice is that there are virtually no humans to be seen anywhere. Yes: the Equinix's NY4 data center hosts 49 exchanges (among the customers that pay to use this Secaucus location) and it is all just servers and fiberoptic interconnections either between them, or to the outside world.
That's not a coincidence: the building wants to attract as little attention to itself as possible because it happens to be the most critical node in the U.S. financial system. "The 49 different exchanges that lease space at this data center sent a record 9.6 million messages per second through its fiber-optic cables in February. Every day, electronic trades representing trillions of dollars’ worth of equities, derivatives, currencies, and fixed-income assets pass under this roof. This is NY4."
NY4 is just one of the core assets, or "crown jewels" of Equinix, the $22.7 billion company that’s quietly grown into the world’s largest owner of interconnected data centers, which really is a fancy name for warehouses.
As Bloomberg reports, its clients pay in part because of who else is there. NY4 Clients includes the Chicago Board Options Exchange, Direct Edge, ICAP, Nasdaq, the NYSE, and Bloomberg LP, the parent company of Bloomberg News.
Servers in cages at NY4. Photo: Bloomberg
It's not just legacy Wall Street firms, or their more recent collocated High Frequency Trading spawn that call Secaucus their home. IEX Group, the firm that starred in Michael Lewis’s 2014 book Flash Boys, stashes a key piece of its hardware in one of Equinix’s New Jersey data centers: a coil of fiber-optic cable that slows orders down by a fraction of a second. And those firms are just from the handful of financial industry customers Equinix discloses. It connects more than 6,300 businesses to their customers, and most of those firms don’t want it known that they lease one of NY4’s metal cages, which are identified only by numbers, not names.
It's not just Wall Street. Equinix’s nonfinancial clients, meanwhile, include some of the Internet’s biggest names: Amazon.com, AT&T, China Mobile, Comcast, Facebook, Hulu, LinkedIn, Microsoft, Netflix, Pandora, and Verizon.
It is the immediate proximity of these non-financial that makes the building all the more desirable for financial companies which are located at the very place where the servers of companies whose assets they trade billions of times per day, are actually located.
As Bloomberg adds, much of the Internet is literally run through the nondescript buildings Equinix has scattered around the world. “They’re a crucial component of how the cloud works,” says Colby Synesael, an analyst at Cowen & Co. who covers Equinix. “It’s where the Internet lives.”
As it turns out, the internet is very heavily protected. The security at NY4 is unprecedented: to get from the parking lot to a spot where you could touch one of the servers you’d have to go through five checkpoints. One of them is a so-called man trap with two automatic steel doors that never open at the same time. Your palm print is required twice in addition to your PIN code. A wall of video monitors captures every nook and cranny of the 338,000-square-foot building.
Those lucky enough to enter will notice that once in, the space is enveloped by a rush of white noise from the thousands of computer fans whirring away to keep the servers cool. To help maintain the temperature, the ceiling is 45 feet high, roughly four stories up. It’s barely visible—not just because of its height, but also thanks to all of the suspended trays of cables and cooling ducts running overhead. All this goes toward one statistic: Equinix says in its annual filing that it kept its facilities up and running 99.9999 percent of the time in 2015.
The 12 air-handling units in NY4 move cold air via overhead ducts.
However, in the off chance that primary power is somehow interrupted, NY4 is protected: the company prides itself on its backups. According to Bloomberg, the structure's uninterrupted power supply room has 5,600 batteries on standby to provide eight minutes of electricity while the generators rev to life. Should the air conditioning fail and risk the servers overheating, there are three 150,000-gallon tanks filled with water chilled to 45F. Running that cold water through pipes would give NY4 staff 20 minutes to get the AC fixed.
Finally, there are the generators: 18 of them, "each the size of a locomotive engine and able to crank out 2.5 megawatts of power" Equinix keeps 180,000 gallons of diesel fuel on-site to run them. In terms of footprint, NY4 is roughly the same size as a Manhattan block. If you want to look out the window, too bad. There isn’t one.
Standby power comes from 18 generators that can crank out 2.5?megawatts each. Photo: Bloomberg
As Bloomberg, whose reporters recently visited the facility, reports "there’s a slick appearance to it all, from the red-lit foyer to the metal all around and the blue lights that shine from above. This last feature comes in handy at night for security purposes, but it’s also got an aesthetic touch to it. “When everything is dark and you only have these blue lights, it looks really cool,” says Michael Poleshuk, senior director of operations for Equinix in the northeast region, as he leads a tour."
And this is the brilliance of Equinix: while exchanges, dark pools, ATS bicker and compete who gets what traffic, and cloud providers scramble to reach clients, one company has managed to roll up the most mission-critical providers of life in the US as we know it - it would not be an exageration to say that a double digit percentage of US GDP is made possible thanks to this one warehouse.
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This global network of densely packed data centers is now the reason you can trade a stock on your smartphone in a way that was unimaginable 10 years ago. The six or seven intermediaries needed—AT&T, your brokerage, the NYSE, and so forth—are all housed under Equinix’s enormous roof.
And this is what the nerve center of the real US capital markets looks like.