The surge in demand for artificial intelligence (AI) infrastructure is pushing up the cost and extending the lead times for servers and other computing equipment used by financial-market participants, according to Gordon MacArthur, CEO, Beeks Group.
Speaking at the World Federation of Exchanges’ August 25 webinar, The Emerging Market Exchange Opportunity, MacArthur said the impact of AI demand is being felt directly in the infrastructure market.
“AI bubble has meant skyrocketing costs. We now price servers at 300-400% higher than we were 18 months ago,” he said.
He also pointed to longer delivery times for infrastructure. “Lead times are back to almost COVID-like lead times because the whole AI sector is just taking everything they can,” MacArthur said. “Can you get the infrastructure at a cost competitive price in a timely manner to go and do what you need to do?”
The comments came during a discussion about how exchanges can attract international participants. The panel included MacArthur, Andres Araya Falcone, CTO at nuam, and Munoz Reynoso Josefina del Rocio, Deputy Director at the Bolsa Mexicana de Valores (Grupo BMV).
The discussion covered computing capacity, connectivity, latency, colocation and operational resilience, as well as the infrastructure requirements faced by firms seeking access to exchanges.
Speed versus resilience
Munoz Reynoso said the importance of infrastructure depends on the type of market participant. “For high-frequency traders, market makers, latency-sensitive firms, colocation and ultra-low latency are critically important,” she said. “They need to reduce execution time, and for them, being microseconds faster may improve the queue position and so the execution outcomes.”
For asset managers, pension funds and some retail participants, other factors can be more important: “The difference between hundreds of microseconds and one milliseconds is less important, probably than market depth, transparency, and regulatory protections,” Munoz Reynoso said.
She also emphasized resilience. “A market can remain attractive even if it’s not the fastest or the absolute fastest,” she said. “But if a market continues having outages, data failures, operational instability, disruptions—it cannot remain attractive.”
Resilience, she said, supports “continuous trading, the market confidence, and regulatory compliance.”
The cost of connecting
Araya Falcone said the costs associated with accessing a market can affect the business case for global brokers.
“The metric that kills the business case isn’t the fee schedule; it’s cost of access divided by expected revenue,” he said.
He pointed to differences in protocols and data models as potential obstacles.
“Not standard FIX dialects, proprietary APIs, spec publish only in Spanish,” Araya Falcone said. “Every deviation turns into the vendor certification project, and that project sits in a queue on their OMS provider for six or 12 months.”
“You’re not competing really for their capital,” he added. “You are competing for a slot of someone else’s release calendar.”
Araya Falcone also described how a standardized process enabled an international broker to connect to nuam’s new trading system within a week.
“Monday we share the specs. Tuesday they’re connected to the UAT environment, start to flow FIX order entry. Wednesday we validated that everything is fine and helped them to solve the problems. Thursday, they finish the connectivity, and on Friday we certificated,” he said.
“Next week they start order flow from New York towards a huge client that demand this speed of access,” he added.
Managed infrastructure
The panel also discussed managed infrastructure as an alternative to traditional colocation.
MacArthur said exchanges need to make access easier for a broader range of participants.
“You need long-term buy-and-hold. You need prop shops. You need a healthy segment of the market,” he said. “And some of these guys do not have the budget and the headcount to do this.”
“Make it easy for your clients,” MacArthur added.
Munoz Reynoso said managed infrastructure can also demonstrate an exchange’s operational capabilities.
“Managed infrastructure is a credibility signal, not just an IT decision,” she said. “Why? Because it demonstrates that an exchange is committed to resilience, to operational excellence, to security, to consistent service delivery.”
She said the traditional colocation process could take six to nine months, while managed infrastructure could allow a client to start trading within “one day, couple of days.”
Infrastructure and liquidity
Araya Falcone said nuam views infrastructure investment as a commercial and market-development issue.
“We treat it as a revenue and liquidity question first of all, not as an IT cost,” he said.
He identified recurring revenue, increased liquidity and reduced time to revenue as factors in the investment case.
“The liquidity flywheel … actually wins the argument,” Araya Falcone said. “Lower the barrier to entry, and you attract international market makers. They tighten spreads and deepen the book, and a deeper book brings in local institution and retail flow.”
MacArthur cited the Johannesburg Stock Exchange as an example of managed infrastructure gaining adoption. He said that after three and a half years, about 10% of the exchange’s total volume across asset classes was coming through the managed infrastructure platform, with that figure expected to rise to 25% over the following months.
“What’s interesting is over the next couple of months, that’s going to jump to 25%,” MacArthur said. “That’s because the big banks have now embraced it.”
The webinar covered the infrastructure requirements exchanges and their participants face, including computing availability, latency, connectivity and resilience.
“Can you get the infrastructure at a cost competitive price in a timely manner to go and do what you need to do?” MacArthur said.
The image for this article was generated using AI.
