Wall Street's Hottest Address? K Street

1275 K Street in Washington, D.C.
Source: Google Maps
1275 K Street in Washington, D.C.

In computerized high-speed trading, as in real estate, location is everything. On Wall Street, high-speed firms pay fees to locate their computers in the same data centers that house stock exchange computers—so trades aren't delayed by more than a few feet of fiber optic cable.

But in recent years, high-speed trading firms have quietly been able to add servers in a less expected place: The nation's capital.

That's driven by an insatiable demand for economic statistics—many of which are released by the federal government and move markets almost instantly when they become public.

The most high-profile of these is the Labor Department's employment report, disclosed monthly at that agency's Constitution Avenue headquarters. The Federal Reserve announces Fed funds rate changes to reporters in a room in the basement of the Treasury building on Pennsylvania Avenue. Just around the corner, the Commerce Department regularly spits out a passel of economic indicators. And the Department of Energy puts out natural gas inventory data from its building on the other side of the National Mall.

All that information is generated within just a few square miles, but instantly affects markets trading around the world. And that presents a business opportunity for the Denver-based data center company CoreSite, which operates a facility where traders can install so called "co-located" computers right in the heart of Washington. The idea: Get access to federal data milliseconds faster than those traders waiting patiently for it to travel at the speed of light up fiber optic lines to markets in New York, New Jersey and Chicago.

Being the first to trade on market-moving information can be extremely profitable—and that's what's driving firms to invest resources in a continuing effort to slice the amount of time between information release and trade into ever thinner increments. All of it—the information's transmission, translation, and trading in a journey from Washington to market servers in New Jersey, New York and Chicago—happens faster than the speed of human thought. It takes a person 300 milliseconds to blink an eye. But the firms involved in this telecommunications arms race view a single millisecond as a margin of victory—or defeat.

Although it seems like information travels on the Internet instantaneously these days, it doesn't. Data can't travel faster than the speed of light. So the telecommunications arms race in markets has become all about getting as close to the theoretical speed of light transmission time as possible—and putting computers as close together as possible, to minimize even the tiniest delays.

The Washington computer facility is located at 1275 K Street, NW, in a bland brick facade office building on a downtown thoroughfare better known as the home to Washington's lobbying and political consulting firms. In a way, the facility is not that different from K Street's older industries, which have long known how to take what Washington does and turn it into money. High speed trading is just a 21st-century twist on that old idea.

In a 2010 press release, CoreSite trumpeted the arrival of two economic news service providers at its 1275 K Street facility, saying "With critical, market-moving data being released directly from the U.S. Departments of Labor, Commerce and Treasury, these companies identified CoreSite as the best data center in the closest proximity."

(Read More: NY AG's Early Data Probe Goes Beyond Reuters)

CoreSite is a company that operates data centers around the country where its customers pay to house their computer servers. In the facility, customers can connect their machines to a variety of other companies' servers and a range of telecommunications options to transmit data quickly. The firm provides power, cooling, and even private key card and biometric access devices to its tenants.

CoreSite touted its superiority over competitors located just a few minutes' drive away in the northern Virginia suburbs."In high-frequency trading environments, a millisecond difference is a major advantage for filling more trades at better prices," it said.

A spokesman for CoreSite declined to comment. Coresite is just one of several tenants of the building, which had included a Cosi sandwich shop on the ground floor. But the building is the focal point of quite a bit of transmission activity.

1275 K Street: Location, Location, Location

Treasury Department .5 miles 2,640 feet
Department of Labor 1.2 miles 6,336 feet
Department of Energy 1.2 miles 6,336 feet
Department of Commerce .7 miles 3,696 feet
Source: Google Maps

The telecommunications firm Anova Technologies put out a press release this year highlighting its super fast microwave transmission route between NASDAQ computers in Carteret, N.J., and another data center that's also located inside 1275 K Street. In that press release, Anova boasted that its new transmission route only deviated from the curvature of the Earth's surface by a scant 2.1 kilometers—very close to the straightest possible path between New Jersey and Washington. "What that translates to is we're the fastest, for the near-, mid- and quite likely, long-term," said Anova CEO Michael Persico in the press release.

One of the firms CoreSite said operated out of its 1275 K Street space was RapiData, an economic news service that offered government data in "machine readable news" format suitable for plugging directly in to algorithmic trading systems. RapiData was later acquired by NASDAQ OMX.

A NASDAQ spokesman confirmed to CNBC that the exchange maintains servers at the CoreSite facility at 1275 K Street. "As an exchange, we have a responsibility to ensure a level playing field by releasing information only when the government releases it to the general public," the spokesman said. "We're in the market data business, and we believe it is important to give a variety of consumers access to the tools they need in an increasingly competitive marketplace."

In fact, NASDAQ OMX markets the high-speed Washington government data as part of its "Event Driven Analytics" product in a video backed by thumping techno music on its website. The video features a human eye blink, which takes at 300 milliseconds, and a hummingbird's wing flap, which takes 50 milliseconds. In the video, NASDAQ touts its data feed with the tagline: "Blink at your own risk.

(Read More: Thomson Reuters Gives Elite Traders Early Advantage)

Another firm operating out of 1275 K Street, CoreSite said in 2010, was Need to Know News, a data feed service that is now owned by Deutsche Borse. That exchange offers a product known as "Alpha Flash," a high-speed algorithmic news feed that Deutsche Borse says "was developed for the most demanding algo traders at hedge funds, trading firms and financial institutions using resources from our fully accredited news agency MNI, whose journalists have direct access to government lock-up rooms and embargoed releases."

A "lock-up" room is a press office where reporters can often go to receive government economic data before it is released to the public on the condition that they not release it until the embargo time. Security varies in these facilities, but often reporters are required to surrender all electronic equipment before entering, and some government agencies attempt to regulate the telecommunications lines by which the data are sent to the outside world, in an effort to ensure fairness. Elsewhere in its marketing material, Deutsche Borse says government economic data is sent to the exchange's clients "directly from government lockups; privileged embargoed releases are available immediately after the embargo has been lifted."

Deutsche Borse declined to comment for this article.

Which high-speed trading firms also co-locate their servers at the 1275 K street facility? It's difficult to tell. CoreSite declined to provide a list. CNBC contacted several of the most prominent high-speed trading firms, and all but one declined to offer any comment.

One firm, Allston Trading, said through a representative that it "no longer has anything in that facility in Washington."

—By CNBC's Eamon Javers. Follow him on Twitter: @eamonjavers