Trading firms, from Wall Street banks to high-frequency hedge funds and market makers, spend millions each year to place their trading models right on exchange servers. It's a big revenue generator for both traders and the exchanges, but is it right?

That's one of the central questions being discussed today on Capitol Hill, where high-frequency experts have once again been called to speak, this time in front of the Senate Committee on Banking, Housing and Urban Affairs. While there are several other issues at play on Thursday, where politicians are hoping to get a grasp on how to prevent another Knight Capital snafu or another "Flash Crash," collocation is as good as any place to start.

Most investors rely on feeds that consolidate prices throughout the market. Through computer hook-ups that connect exchanges in New York, Chicago and other cities, an average trader will see one consolidated tape of prices.

But while that multitude of data is being transferred from exchange to exchange and then onto a trader's computer, high-frequency and other traders can access prices a split second faster through direct feeds.

This practice is known as collocation, and it's employed by nearly every exchange in the U.S. For a fee, trading firms are allowed to place their trading computers in the same data centers that house an exchange's computer servers. With sophisticated models built into these trading computers and little oversight on the exchange itself, the computers are almost guaranteed to be the first on any order should they choose to act on.