Swedish regulators have raided US-owned bourse operator Nasdaq OMX Group in a competition probe likely to raise questions over exchanges' efforts to woo controversial high-frequency traders. The raid, carried out last month, was prompted by a complaint by new Nordic marketplace Burgundy. Burgundy said it was denied space for its computers alongside those of clients, such as banks, in a data centre owned by US telecoms company Verizon.
That put it at a disadvantage to larger rival Nasdaq OMX, Burgundy said, which had got space in the data centre near clients enabling the exchange to execute super-fast trades. Physical closeness of a trader's computers to those of a stock exchange - a practice known as co-location - can shave fractions of seconds off client orders, giving the super-fast trader an edge over those that are further away. Established stock exchanges, under pressure from alternative venues such as Burgundy, are increasingly relying on the revenues and liquidity provided by hedge funds and proprietary firms that use algorithms to execute lightning-fast trades.
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