A server is a computer, or a program running on one, that supplies data or services to other machines, called clients, across a network. In electronic trading the word usually means the dedicated machines on which a firm's trading software runs. Separate servers, or separate processes on one machine, typically receive and decode market data, run the strategy logic, apply risk checks and send orders to the exchange. The exchange in turn runs its matching engine and data distribution on servers of its own.
Where speed matters, trading servers are installed in or near the exchange's data centre through colocation or proximity hosting, and are built for low latency with fast processors, specialised network cards and tuned operating systems. Slower strategies often run on rented capacity in the cloud. Reliability matters as much as speed, so firms keep backup servers ready to take over if a primary machine fails.