## The Nanosecond Landlords

The New York Stock Exchange (NYSE) and NASDAQ are not primarily trading firms anymore; they are highly specialized commercial real estate landlords. They realized that High-Frequency Trading algorithms will pay literally anything to be physically closer to the "Matching Engine" server that executes the trades.

### FAQ

**Q: Why does renting a 2-foot wide server cabinet in New Jersey cost $540,000 a year?**
A: Nanoseconds. Light travels through fiber optic glass at roughly 1 foot per nanosecond. If your server is 100 feet further down the hallway than a Citadel server, Citadel's algorithm will see the stock price 150 nanoseconds before you do, and they will take your money. By placing trading servers inside the exact same building as the Exchange (Colocation), hedge funds buy speed. To prevent lawsuits, exchanges are forced to coil equal lengths of fiber optic cable in a physical box above every server so that light technically travels the exact same distance to all racks, but they still charge millions for the privilege of plugging into that box.