Wall Street Turns to Cloud to Address Cost, Competition
October 24th, 2012 By: Jason Verge
There is a shift underway in how Wall Street trading firms manage their technology, as financial cloud services aim to reduce the cost of low-latency trading infrastructure and to streamline access to a wide variety of trading applications. Cloud computing has been a savior to those in expense management mode, as well as has been a boon to startup firms.
Several cloud offerings have lowered the barrier to entry, while providing compelling financial considerations to go with a financial cloud service. NYSE EuroNext and NASDAQ OMX Group came to market with financial cloud services in a bid to fill up their data centers, as well as diversify and increase revenue on coattails of their respective brands. Colocation providers like FiberMedia have gone to market with their own vertically-targeted offerings as well, while financial infrastructure services have also become key offerings for providers like Equinix, Telx and Savvis, who all continue to court the financial vertical.
NASDAQ brings Wall Street to AWS
In September, Nasdaq began offering a service called FinQloud to financial services clients desiring to store regulatory data or analyze trade data with on-demand cloud resources through Amazon Web Services. The service consists of Regulatory Records Retention (R3), a regulatory data retention product, and Self-Service Reporting (SSR), an analysis tool for trade data. This provided more credibility in the enterprise world for AWS, which manages financial data from a number of sources in addition to NASDAQ OMX.
The data is hosted in private data centers due to its sensitive nature. For regulatory compliance requirements, data connections to FinQloud pass through an encryption system in a NASDAQ data center on its way to AWS. Dispelling the bad press that high frequency trading technologies took after algorithmic errors that (like the “flash crash” of 2010) is imperative. FinQloud enables regulators to have better access to financial data through cloud services, hopefully bringing more stability. The Regulatory Records retention piece was developed specifically to address a Securities and Exchange Commission rule stating these obligations need to reduce cost and complexity going forward. These sort of initiatives and rules are becoming prevalent in a lot of major sectors, including Federal and Healthcare.
FinQloud is largely considered a win for AWS because of the credibility it brought in tow. AWS wants to prove its mettle with mission critical services, and here it has the potential to build a track record with customers expecting high performance, in tandem with unique regulatory requirements. If it continually passes this test, it will boost confidence in Amazon’s services, and potentially offset the setbacks of high profile outages.
NYSE EuroNext’s NYSE Technologies Community Platform
NYSE EuroNext launched a cloud platform for traders in partnership with EMC and VMWare in June 2011. Dubbed the NYSE Technologies Community Platform, it allows trading groups to outsource more of their trading infrastructure to the exchange’s data centers. It was an unprecedented move to grab this business and build a virtual trading hub. It has two very solid advantages going for it; the brand name and the proximity. It has facilities in Mahwah, New Jersey, and Basildon, London, plus additional hubs in Toronto, Sao Paolo and Tokyo it wants to fill.
Last year, early access to the NJ data center, where NYSE has all of it US-based markets running (jncluding the New York Stock Exchange Markets, the Arca Electronic Markets, and AMEX) was successful enough to deploy the same VMWare-based environment in its Basildon, London data center, where it runs all of its European markets. Clients can access both infrastructure and platform as a service in both locations. It’s extended a slightly stripped-down versions of the platform to Toronto and Tokyo as well, an intriguing proposition for clients expanding globally. All four locations have production clients.
These are businesses that are heavily reliant on market data. With the NYSE cloud, that market data is somewhat socialized and made more accessible. It can offer filtered market data feeds, and historical market data access. It saves the time and expense of downloading the data to a separate data center. It has order routing capabilities, can host proprietary trading software or that software can be hosted on separate, physical servers, and is evolving to becoming a full PaaS or framework
NYSE”s financial cloud services also have the benefit of its name. It’s a private setup, cut off from the Internet that allows users within the ecosystem to connect to one another.
Good high-level summary of the datacenter and cloud offerings in Financial Services. (Well, Capital Markets used interchangeably). More than any other vertical, The FS markets have a tremendous gravity towards eco-systems in facilities such as 350 Cermak and 111 8th because of the counter parties they need to connect with. For Telx, which operates the Meet-Me-Room in these facilities (and many more) it’s been this eco-system connectivity which has become the backbone for the FS marketplace.
“Cloud” has been around Wall Street since the introduction of the original Grid Computing wave, which was really the beginning of the virtual machine/cloud movement. As you point out, private clouds are gaining significant traction within FS though arguably a bit slower than other markets. We’ve seen a number of FS clients setting up their own private clouds inside our colo facilities, particularly in our Clifton NJ facilities which has a much better price/performance value compared to the datacenters which house the exchanges. And with the equities business under significant pressure, every dollar counts. But even more interesting is the new optimized fiber being run into NJ which has just transformed Clifton from a low-cost campus datacenter into a low-latency hub. Check out the proximity of Clifton to the equity exchanges. It sits almost exactly in the middle between Mahwah and Carteret. Here’s a map: http://ow.ly/eL5pP
Great article. We see more and more financial companies considering private cloud solutions. Most are real scared of the public cloud because of all of the outages over the last few years.