[strongvigilance]

Generally it's possible to colocate servers in the same datacentre as the exchange servers. This isn't really a competitive advantage though, as anyone who needs latency that low will be doing the same, and the costs will be relatively insignificant compared to salaries of people who can build the required systems.

[dominicgs]

While I completely agree that there is no advantage over other HFT competitors provided by being located within the exchange datacentre, there is a disadvantage to not being there. This gives the exchange an opportunity to make a significant amount of money from each HFT company without hurting other customers.