How Do Exchanges Ensure Fairness among Co-Located Clients?
Exchanges ensure fairness by standardizing the physical infrastructure for all co-located clients. This includes providing server cabinets at an equal cabling distance from the central matching engine, ensuring no client has a physical latency advantage over another.
They also provide access to market data feeds simultaneously to all participants. Rules are established to govern port allocation and bandwidth usage to prevent any single firm from monopolizing resources.
Essentially, they aim to make the physical setup identical, forcing competition to be based on algorithm quality, not cable length.
Glossar
Fairness
Principle ⎊ Fairness, within the quantitative finance and crypto derivatives landscape, represents the foundational principle of equitable treatment for all market participants, irrespective of their capital size or informational advantage.
Equal Cabling Distance
Standard ⎊ Equal Cabling Distance is a critical infrastructure standard enforced within co-location facilities to ensure that all trading participants have identical physical network paths to the central matching engine.