Internet exchange points and what they mean for finance

A network that does not peer buys IP transit: a carrier takes its traffic and passes it on through other networks to the destination. In a paper for banks, DE-CIX names the drawbacks: the cost, and no control over the route, since a carrier cannot connect to every network and the data passes through several more. At an IXP, two networks peer instead and each sends the other the traffic for its own customers over the shared platform. According to Wikipedia's article on IXPs, peering traffic is usually not billed, the participants share the operating costs, and fees are mostly charged monthly or yearly by port speed.

Technically, each participant connects a router to the exchange's switches, nearly always over Ethernet, and runs BGP sessions with the networks it wants to reach. Route servers save most of those sessions: at DE-CIX Frankfurt about 80 percent of the connected networks are reachable through them. Most IXPs are run as not-for-profit associations of their participants; others belong to data center operators or public bodies.

The Internet Society lists the effects in its policy brief on IXPs. Local traffic stays on local links, which lowers the operating costs of internet providers, in some countries by 20 percent or more. Access to local content gets faster, and when international links fail, traffic within the country keeps flowing. An exchange also draws data centers and content caches to its location.

The same brief names trust as the hard part. The participants are often competitors, so an exchange works best when its location and management are neutral, and the Internet Society describes setting one up as "80 percent social engineering and 20 percent technical engineering".

DE-CIX runs exchanges in Frankfurt, Berlin, Dusseldorf, Hamburg, Leipzig, Munich and the Ruhr region. In Berlin, BCIX calls itself the leading internet exchange in the Berlin-Brandenburg region; it has run its peering platform since 2002 and offers access at 11 points of presence. The German Wikipedia's list of internet exchanges (in German) names more than a dozen regional exchanges, from Bremen and Hanover to Dresden, Nuremberg and Stuttgart, and several in Frankfurt.

DE-CIX Frankfurt connects over 1,000 networks, with access in more than 30 data centers. The page on DE-CIX covers its traffic records and the services banks use there, and the page on data centers for finance in Frankfurt covers the buildings around it.

DE-CIX's case for banks starts with the online banking session. If a bank peers with a customer's internet provider, the data of every customer of that provider takes a short path that stays off the open internet. Thomas King, CTO of DE-CIX, adds two points in IT Finanzmagazin (in German). Banks connect partners and branches over MPLS networks, which he calls expensive and slow to set up, and he recommends a neutral exchange that is not tied to particular carriers or data centers. Trading applications, he writes, need response times in the low millisecond range, so the data should travel no further than about 50 to 80 kilometers.

Both texts come from the exchange operator that sells these services. For trading, the distance that counts is the one to the venue's matching engine, which the page on low latency trading covers. For open banking, the page on PSD2 covers the interfaces a bank opens to third-party providers.

Under the BSI-KritisV, an IXP counts as critical infrastructure in Germany once it connects 100 autonomous systems on annual average; a housing data center counts from 3.5 megawatts of contracted power. The EU NIS2 directive lists internet exchange point providers in Annex I, in its digital infrastructure sector, next to cloud computing and data center service providers.

Banks fall under a different act. Recital 28 of NIS2 names DORA as the sector-specific act for financial entities, and member states do not apply the NIS2 duties on cybersecurity risk management and incident reporting to entities covered by DORA. The page on NIS2 and DORA for banks sets out where the two meet.

Peering is an agreement between two networks to exchange traffic for each other's customers directly. Public peering runs over the shared platform of an IXP; private peering uses a direct link between the two networks. The German Wikipedia notes that the two parties mostly peer free of charge.

A data center is the building with space, power and cooling. An IXP is the switching platform that networks in those buildings connect to. A large exchange spreads over many sites: DE-CIX Frankfurt is reachable in more than 30 data centers, so a firm that rents space in one of them can connect there.