Colocation
Colocation is the practice of placing a trading server in the same data center as an exchange's matching engine or a vendor's gateway, connected by short dedicated links. It removes most network distance from the order and data path, which matters for strategies competing on microseconds and hardly at all for a trader reading a footprint by eye.
Senzoukria · Glossary · Updated September 2026
Definition
Exchanges and some vendors rent space and power inside their data centers so that clients' servers sit metres from the systems they talk to. CME Globex runs in CME Group's data center in Aurora, Illinois, where colocation customers connect directly. Vendors such as Rithmic also operate access points inside such facilities.
Worked example: what distance costs
Light in optical fibre travels at roughly 200,000 km per second, about two thirds of its speed in vacuum. 1,000 km of fibre therefore adds about 1,000 / 200,000 = 0.005 s, 5 ms one way, 10 ms for a round trip, before any router or processing delay. Real routes are longer than straight lines, so actual figures are higher.
Who needs it
- Market makers and arbitrage strategies whose edge disappears in microseconds.
- Firms reacting to exchange data faster than competitors.
- Not a discretionary trader whose decisions take seconds: a few milliseconds of network delay are far below human reaction time.
In Senzoukria
Among Rithmic's production access points, one, Colo75, is reserved for colocation. The application lists it last and labels it 'colocation only', with a warning that its hostname resolves to a private network, so an ordinary internet connection can only time out on it; the advice is to keep Chicago (core) unless the machine is hosted inside that facility.
Common mistakes
- Selecting a colocation endpoint from a home connection and reading the timeout as an account problem.
- Paying for low-latency infrastructure for a strategy whose timing is set by a human decision.
Related
In the same section
- Color
- Collar
- COT report
- CME trading hours
- Composite profile
- CME session open
- Concurrent login limit
- MDP 3.0
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Frequently asked questions
- Can I colocate a desktop trading application?
- Colocation hosts servers inside a data center; a desktop application used interactively runs on your own computer. A remote server near the gateway can be rented, but the screen you trade from remains wherever you are.
- Why does the colocation access point time out for me?
- Because it is reachable only from the private network inside that facility. From the public internet there is no route to it, so the connection attempt can only time out.