Next year will be the year when financial markets firms start putting real time and money into reimagining their trading operations for an inevitable cloud-based future. Exchanges such as CME – recently partnered with Google Cloud – and Nasdaq – recently partnered with AWS – have already announced their intentions to move their matching engines. Firms need to decide whether they pursue a public, private or hybrid model.
While cloud technology brings appealing features, the limitations of existing public clouds need addressing before wide scale adoption occurs. For example, most exchanges use multicast distribution of market data. Although public clouds are taking steps towards supporting multicast, can they handle the sheer volume of data from some of these exchanges, as well as, any security and regulatory concerns? Firms will also have to navigate the exchanges’ commercial models to ensure they select a cloud deployment where costs still make sense relative to expected savings.
Most firms are likely to pursue a hybrid model: using public clouds where it makes sense i.e., to access an exchange, and using private or hybrid cloud in other areas. Ultimately, there will not be one cloud but a number of different ones that will be tied together to create one cohesive and global trading platform.– Alastair Watson, managing director, EMEA, TNS Financial Markets
You have to be an optimist to run a stock exchange business, so I am going to set aside fears about COVID-19 and its ugly variants and also worries about potential interest rate rises, instead focusing on what could go right next year. I predict that 2022 is when the uncertainty over Brexit and rule divergence finally begins to dissipate and a clearer picture emerges of the regulatory landscape. I hope the UK will come out from this re-alignment with a robust set of rules that are strongly pro-business and less prescriptive than the changes to legislation currently being decided in Brussels.
The other area where I see great strides being made is in the realm of the cloud. While blockchain and crypto has sucked up much of the oxygen in the innovation sphere over the last few years, it is in the altogether more prosaic cloud where we are seeing fundamental changes happening. We are witnessing the evolution of a whole new generation of exchanges that are first and foremost cloud enabled. At the moment, most of these are small scale operations, but as our project with Amazon Web Services and the Singapore Exchange showed, top tier exchanges too can be run successfully in the cloud. I believe we will see this trend accelerate in 2022 and beyond.– Alasdair Haynes, CEO of Aquis Exchange PLC
– Tony Warren, executive vice president and head of strategy and solutions management, FIS
Whether it’s private or public or hybrid, the cloud is becoming more than just a destination for data. It’s becoming a platform for enterprise business transformation, with a notable shift towards end-to-end platforms. Cloud-based platforms allow customers to be much more nimble with the help of open APIs, translucent data and highly efficient solutions. Organisations that become cloud native will be in the strongest position to leverage the benefit of global mega clouds. They’ll be able to truly scale on multi-tenant solutions and benefit from reduced costs. There are environmental social governance (ESG) benefits to this too. The more efficient an organisation can become across the scale, the better position you are in to improve your sustainability score and when it comes to ESG, financial services have a very important role to play. With greater transparency to ESG behaviour from corporations – and their respective equities, bonds, derivatives – this data can be shared with agencies to deliver a clearer rating of the company. Using data providers, these scores can be synthesised, captured against the security master, and presented on easy-to-understand dashboards. For example, an asset manager will be able to look at their book end-to-end and they can see the aggregate ESG score for that portfolio. If they needed to adjust this score up or down, they could do so.