Despite continued uptake of cloud computing systems amongst market participants, demand for cloud-based trade execution remains very low, a report exploring demand for such systems has found.
In a report exploring demand for cloud trading services, Louis Lovas, director of solutions for OneMarkeData found participants have shown very little demand to expand cloud functionality to execution, preferring to concentrate cloud services on key support tasks.
Although 69.6% of the 50 market participants surveyed agreed they would consider use of cloud services in capital markets trading, only 13% said they found trade execution suitable for cloud computing and 72.7% said they did not currently use cloud computing to support trading.
This apparent discrepancy, explained Lovas, is linked to the increasingly common use of the cloud for back-office and support functions, and perceived issues around latency that mean traditional execution via infrastructure housed in a data centre remains more effective.
“The strongest demand for cloud services has been around areas that support key operational functions of trade execution for the buy-side – like quantitative modeling and transaction cost analysis,” Lovas told theTRADEnews.com.
Respondents claimed the most appropriate use of cloud computing was data storage, trade model back-testing, quantitative research and transaction cost analysis.
The top reason firms will expand their use of cloud services is to reduce technology-related costs, according to 95.5% of respondents. However, Lovas said the widespread notion cloud computing reduces costs of key functions like data storage could be misleading.
“This idea that cloud is a saviour for IT costs is not always accurate,” he said. “When you do the analysis it can be more expensive compared to traditional data centre pricing in part due to the compounding nature of cloud pricing as the customer accumulates data.”
An example Lovas gives in the report shows the cost of data storage for six terabytes would become more expensive after two years on the cloud compared to a traditional data centre.
The report, ‘Is Cloud Technology Gaining Momentum in Capital Markets’ included input from 50 market professionals representing investment banks, asset managers, prop trading firms and academics.