The Gaming of Games and the Principle of Principles

Abstract

In 2011, the New York Stock Exchange opened a new outpost in Mahwah, New Jersey, a bucolic township of 25,000 inhabitants about an hour’s drive north of Wall Street. One reason for creating the facility was pretty standard. Trading technology infrastructure takes up a lot of space, so moving it from expensive Manhattan to low-cost Mahwah saves money for the exchange. But another reason for the move was more novel. The New York Stock Exchange (NYSE) built the facility big enough to lease out space to third parties that derived new revenue in addition to the cost savings. But who on earth wants to lease space in an NYSE facility in rural New Jersey? Turns out, finding takers was not a problem. In fact, trading firms were very eager for the opportunity. These firms understood that having their server in close proximity to the NYSE’s servers created a speed advantage; it meant that trades from their co-located servers would reach the NYSE’s servers a few milliseconds faster than trades from servers not in the facility.