As far as I understand it, firms that colocate their servers with a financial exchange do so only at the primary site. (Correct me if I'm wrong).
So what happens if the primary site goes up in flames and operations switch to the DR site? Are colocated servers then effectively excluded from trading, or how does this work in reality?
Yes, I've co-located in the facilities of the respective exchanges... There are many reasons for this, with latency being the primary driver. But access, comms lines, cost and other factors come into play.
As far as DR, that has never come into play. I've never thought about it from a trading strategy perspective. Why? Well, there will be some internal redundancies from the exchange/matching engine/feeds... If the primary site goes, trading more or less halts. These are not necessarily 24/7 critical computing environments. Maintaining stability during the market day is what's important.
In reality, I've had systems go down in a colo and definitely experienced line failures that have taken us out of the market. It is what it is. Your trading strategy needs to incorporate that risk and have the safeguards to handle those scenarios (and a panic button).
As for even gaining access to an exchange's DR site, it may not even be possible.
More details will help us help you, though. What are the players/organizations involved here?
From my understanding, the benefit of coloing at or near an exchange is that you have extremely low latency, which is necessary for high frequency trading. By failing over to a DR site, you will lose this benefit which may or may not impact that firm's ability to successfully execute HFT. I'm not sure that there's any actual requirement to be colo'd in a specific building to trade.
I'm sure @ewwhite will show up here and write 20 pages on this for you, so stay tuned.