[AusNOG] "Why-do-internet-exchanges-need-layer-2"

[Mark ZZZ Smith]

"So, for MLP type setups is it feasible to use layer 3 switching between participants?"
Technically yes, cost effectively no. Moving to layer 3 forwarding rather than staying with layer 2 would mean the IX would have to purchase more expensive layer 3 devices to push traffic around between the peers. Given the volumes of traffic IXes can carry, that could significantly increase the costs of connecting to the IX, with one effect of increased costs being less peers connecting, or perhaps meaning that the IX itself may never have existed. Also consider that "layer 3 switches" typically don't have anywhere near the FIB table capacity that routers do, and therefore IX may have to buy "proper" and therefore expensive high performance routers, and expensive 1 and 10Gbps interfaces for them.
In a "layer 2" IX, another advantage is that as the Route Servers aren't carrying any traffic between peers, just BGP updates, they can be (now) relatively cheap and relatively old routers that couldn't be used anywhere else in the network. Or, assuming you're willing to perform periodic unix admin on them, commodity PCs running Linux or BSD and Quagga, OpenBGP or bird.
Regards,

Mark.