Comment Text:
10-006
COMMENT
CL-00003
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Sent:
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Attach:
Freeman, David
Thursday, July 8, 2010 6:27 PM
secretary
colocation
Comment Letter of Mr. Peter J. Bazil, SAVVIS, Inc. on Rulemaking Release on
Co-Location/Proximity Hosting Services, Comment File No. 10-006
$35 C-210070812370.pdf
Please accept for filing the attached comment letter of SAVVIS, Inc. on Comment File No. 10-006 "Co-
Location/Proximity Hosting Services" 75 Fed. Reg. 33198 (2010).
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http://www.arnoldporter.comjuly 8, 2010
Mr. David Stawick
Secretary
Commodit
7
Futures Trading Commission
Tt~ree Lafayette Center
1155 21
'~
Street, N.W.
Washington, DC 20581
Re;
Proposed Rulemaking on Co-Location/Proximit
7
Hosting Services
Dear Mr. Stawick:
SAVVIS, Inc. ("SAXWIS'~ appreciates this opportuNt
T
to submit d~ese comments on the Proposed
Rulema -king on Co-Location/Prox_kmiry Hosting Sen'ices published by the Commodit?, Futures
Trading Commission (the "CFTC" or "Commission") on June 1!, 2010, 75 Fed. Reg. 33198 (the
"Proposhxg Release"). SAWIS is an information teclmolog3~ company fomaded in 1998 and
headquartered in St. Louis, lVlissouri. We provide network and computer hosting services on an
outsourced basis ro a wide variet
7
of businesses and government endties nadomvide and around the
globe. SAWIS provides services that include maaxaged hosting, co-location/proximit
3,
hosting,
managed security, network and professional services. We operate 31 data centers ~ound flxe xvorld
with appr6~-dmately 1.48 million square feet of gross raised floor space, and a Tier 1 Jaitemet
backbone with over 17,000 miles of fiber. Our customers range across many sectors inclucthag
airlines, media and entertainment, software, govermnent agencies, and securities firms and markets.
Through ou~ state-of-the-art data centers located around the comm
7
and abroad, SAVVIS provides
a location for clients to conduct their data processing in a secure euviromnent at an efficient cost.
SAV%~IS is not a corm-noNties or sectaries firm or market, and does not operate ~ trading market.
O~ comments are focused on two issues. First, ~sc!osures on latency ae more complex and
expensive to develop ,and docmnent, not as s~pte, and the information that can be provided not as
mea~dng~, as the Proposing Release xvoOd suggest. Because most of our customers are not
interested ha low latency, we question whether the ost and burden o£ creatk~g and documenting the
information reqNted for the ~sclosures is justified by fl~e ~ted useB.tlness to rlmse Customers who
are interested in low latency. Second, we urge that the Me not allow a licensed market to regulate
and. stifle competition from data hosting centers under dae guise of "obtai~lg information" for its
"self regulator
3,
obligations
and oflle~
obligations under tiae Commo~t
7
Exchange Act and
Coirnrdssion Regt~fions."
We support file Cmrunission's efforts tl~rough the Proposing Release to assure that electronic access
to ~a~g markets is provided on a f,~ and equitable basis to all qualified participants. Based on our
rea~g of the Proposing Release, we understand that the Commission is not seel'dng to _regulate or
hnpose access, disclosure or pricing req~ements on "Third Party Providezs" such as SAVVIS.
Fax:l~Lt', David Stawick
July 8, 2010
Page 2
Because T!fird Part}, Providers do not have a monopoly on electronic access to the licensed markets
and tra~g centers, data hosting, co-location or proof
T
hosting, but instead compete with one
another to provide these services at the best price and service quality to our customers, a regulatory
check on ore-prichag and access terms xvould serve no purpose and xvould not benefit ore"
customers, the markets or end users. Moreover, we do not monitor or contro!
the use o~-out
systems by our customers or co~ect ~formation from our customers or report on their use of our
systems. We urge that the Commission not adopt any regulatory requirements that would directly or
in~ecfly hnpose such obliga~ons upon us, as any such obligations would requke majo~ changes to
o~ systems and methods of operation, and would furMamentally change both the role of Third
Party Providers and ot~ relationslfips to customers and licensed markets and t, ading centers.
We urge the Commission to coordinate its efforts ha this area xxdth the Secn~ties and Exchange
Commission to assure that tile txvo agencies' respective req~ements regar~g co-location and
proMmity hosing are not in conflict, ~ onsistent or mutually Mcompatible.
Lowdatency data and teleco,m'nunications access has been broadly used across a variety o£indus~es
for many yea~:s. Co-iocadon and proximity hostfl~g are broadly proxdded m make low-latency access
occur ha a low cost, non-discritMr~ato
W
manner
. Most of out data center customers are not
interested ha low latency. Rather, they seek to louver capital expenditures and opera~ag costs by
outso~cing thek data sites. There are few barriers to em_t
T
into the data hosing business, xvith
active competition and a demanding customer base that forces vendors to provide !figh qualitT,
higkly sect~e, Iow cost serv'ichag and hos~ag. The fees charged by SAra/IS and other data site
hos~g se~ices for proxflnity hos~ag generally are lower than those charged by exchanges for
location access, Pro~ty hosting by tied,party vendors pro~des a competitive check on the use
of market prover by licensed exchanges and market centers that might otherwise abuse the market
power accorded by their licenses.
Latency Disclosures Expensive to Create and Docmnent and Not S~ple or Mways Meaning~
The Proposh~g Release would requke tra~g markets to provide monthly disclosm-es to the public
of the longest, shortest and average latency for each com~ectivit), option pro%ded by tlle execution
fac~t3~, To do so, the markets xvill need to gather and calculate data internally from their oxvn
systems, as well as from tlfird-party proxqders such as SA~IS.
This latency disclosure w~ ,~ot be as c!e~t', or as mea,]k~gful, as the Proposing Release suggests,
There are not at present generally accepted standards for catculath2g and discloshag latency. Total
latency Consists of a number of elements-pro:pagation latency', or the amount of thee it take a signal
to travel from the sender to receiver overa medium, serializatio~ latency, or the ,'unotmt of time it
takes a computer or network device to create a bitstream on a ne~ork, and processi~g latency, or
the
amount of thne it takes a network device to ex~e and route traffic across a network.
Propagation latency can be calculated by
djsfa**ce / wave proprga/ion a'pe.ed.
Fiber optic cable, t3~pically
composed of at~m~msi~cate or germanosilicate (s~ca glass, or SiO2, doped with Germanium
Dioxide, GeO2, or ~Muminmn Oxide, A1203) reflects light along the aMs of its cy!flMrica! dielectric
wavegttide core. In tiffs me,urn, the wavef:ront p~:opag-ates at around ~vo-t!~rds c, the speed ofNix. Dax.qd Stawick
July 8, 20!0
Page 3
light, or about 200,000IGn/s. "i~s means that xvi~ the ~ted space of a data center, propa~don
delay is not a major contJ.~butor to latency. Wl~ite it xvould take around 100 microseconds (.0001
seconds) for light to n'aveI 20t~n ....................................................
1 microsecond
(.000001 second).
Since most ~s witlain a data center are connected ~ectly to each other x~ia copper or fiber optic
cable, the latency xvit!~ tl2e data center is simply not very sigmificant. The average latency for t!~e
fastest market centers to fill or aclmowledge an order is around 200 microseconds, There is a risk
that the proposed new disclosureg xvil! simply confuse customers and market participants with
information tt~at is spttriously precise and simply not relevant to the actual latency of access tbxough
dae end user's system or the mettlods of operation 6fthe end user. SA'vWIS does not charge a price
pre~tma for a customer who is tile data center to take advantage of low Latency xvhen comp~'ed
to a customer who is using tl~e data center for conve~ence to their home office, nor do we charge a
premium for an area of the data center adjacent to a matclfing engine, compared to space on another
floor,
Many teclmical questions arise fix describing Iatency, such as betxveen xvhat nvo points should latency
be disclosed? There are ma
W
factors not ~:elated to the data center itself that are inherent in the
customer's oxvn systems and data back-up locations, internal resiliency in ~telecommunications routing and other variables, that greatly affect latency and that make it difficult
to compare and disclose latency in a standa~d xvay that xvould not further confuse file matter.
Providing information to the degree of precision ~:equired by file proposal xvill be quite a complex
and expensive underta "king which xvou!d impose significant nmv and mmecessary costs.
Moreover, file majority of SAVSqS' data center customers are not interested in low latency. Tllough
some take advantage of the lmv latency connectivity available at the facility, many of our customers
axe taking advantage of file cost efficiencies that data center and IT outsourcing prm,~ides them. An
unintended consequence of the proposed disclosures is that they could result in higher costs for all
customers, including the majority that have no interest in toxv latency.
The market and demand for outsomced data centers has evolved over fl~e past decade for reasons
unrelated to loxv Iatency. There are strict req~ements for data centers related to securitT, and
continuous access to power and telecommunications links. Histol~calty, many data systems used by
file secu~dties and fmancia! serv-ices industry were located in loxver Manhattan, and were moved to
New Jersey or elsexvhere in tile aftenriath of tlxe September 11 terror{st attacks and an increased
business and regulator
T
focus on business continuity and disaster recovm3,
. Through scale
efficiencies, outsottrced data centers xvere also able to provide customers xvith greatly reduced
operath~g and telecommm~icat:ions expenses, which has played a large rote in recent years h~
attracting customers from a xmriet
T
of industries to data centers
.
SA~WIS does not charge additional fees fo~ those customers whose ~terest is lmv latency, we do
not sell preferred latency to some customers, and xve do not monitor the types of use by o~
customers of the seta~ers in out" data centers.Mr. David Stawick
July 8, 2010
Page 4
Betxveen the difficult3, and expense to trading markets and thi~rd party providers in gathe~g,
calcula~xg, updaO~g, and documenting the information required for the proposed Iatency
disdosm'es, and the ~ted usefiah~ess of the disclosures to most or possibly a!I clients, if not
care~lly formulated and tailored from a technical perspective and proxdded hi a context that xxd]l
assist the cusomer in understanding
its
~elevance to the
customer, we quesdon whether
the
proposed latency disc!osure xx,:ill be wortt~ the cost and effort involved ~ pi'epaiOng it. SA~rlS
would be pleased to work with the Commission and tra~g markets to st,~t to define the ldnd of
latency repor~g tlxat would be req~rkred and provide technical information and practical insights
~om a systems perspective on how the obiecdves of the Cold,mission embodied in the Proposing
Release can be delivered.
Licensed Markets Should Not Regulate Tt~_td Party" Data Services Providers
The Proposing Release xvou!d req~e licensed markets to "ensure that it obt,q_i_ns on an on-going
basis all information necess~ from those ~d~parties to carry out its self-regulatory obligations
¯
i1 ~
and ottler obHgano s under federal commodities laxvs. Certain commodities and sec~ties mamkets
a~e expanding into providfilg data hos~g and other data services. Government,granted licenses
and self-regulatory authori
g
of licensed markets give them a de~ee of market power and monopoly
over access to thek systems and t, ading market. Ttfir&party data sen~ice providers operate in direct
competition with these data
hosting
and other Services offered by those licensed markets, and help
assure that high quality data se~ces are broadly" av~ble at a low cost. SA\WIS does not be~eve it
is appropriate to give one competitor regulatory oversight over other thii'd.par¢ data hosting
seix-ices arid pro~ders. Such an ~mrangemetIt would give the licensed markets the power, dkecfly or
fl~ough more subtle means, to stifle competition, reduce innovation and quailS, and raise pricing
for these seindces.
We note that the Hcensed markets are playing a dual role in tl~s policy debate. As practitioners of
co-location, they are retreating a strong and articulate defense of the practice. But as regulated
entities that are both customers and competitors of data centers, they appear to be seeldng a
measure of regulatory oversight over third-party data centers. ]]~e motivation of some may in part
be to impose banqers to enn
T
and to restrict competitim~ that may undernfine tlieir ability to cha~ge
t~her fees to conmnodities or securities firms for co-location.
Conclusion
Disclost~es of latency as contemplated by the Proposed Rulemaltaxg will be more complex and
expensive to develop and document, and not as me~gful to customers, than is suggested by the
proposal, Because most of our customers m'e not ~terested in low latency, xve question whether the
cost and burden of creating and documenting the hxformation req~ed for the disclosm'es is }us~ed
by the ~ted usefxth~ess to those customers who are interested ha low latency, We would be
pleased to prox,ide tecimicat arid systerns insights to the respective staffs of the Co.tln-nission and the
trading markets to start to define tile l'dnd of latency repor~lg that would be req~ed and advise on
the practicalities of how this can be delivered in a way that is cost effective and meaningf~ to end
userS.Mr, David Sta\vick
July 8,20t0
Page 5
Vendors such as SAVViS provide a competitive counterxveight to codocation se~ces provided by
licensed markets that helps keep access equal, fees low and service quali~ at a high Ievel. Licensed
markets should not be granted supe~iso
D,
authori~ over data hosting services, because that dual
role poses conflicts of interest between the market's role as an SRO mxd ~e market's interest [ix
fringing ~evenues from its own data hostk~g bus~ess.
We thank you for tt~e opportunity to comment on the Proposing Release and for you~ consideration
of these viexvs.
S~cerely,
Peter J. Bazil
Vice President, Associate General Counsel
cc~
The Honorable Gary Gender, Chakman
The Honorable blichael Durm, Commissioner
The Honm:able Jill I£. Sommers, Co~mnissioner
The Honorable Bart Chilton, Co~ssioner
The Honorable Scott D, O'M~, Commissioner
