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.
Fibermedia’s Financial Flexcloud
Fibermedia is a New York-based data center services provider that has approximately 140,000 square feet of space in the New York region, the hub of finance in the U.S. Its facilities in Secaucus, NJ and Westchester, NY have good proximity to financial institutions and its Chappaqua, NY facility is located near many firms on the buy-side. The company offers Financial Flexcloud, an IaaS platform designed specifically to support the financial services industry, and its low latency requirements.
The turnkey infrastructure solutions enable trading and back office functions on the cloud, from test and dev to production. Hosted in a carrier-neutral Tier3 data center, it mixes physical infrastructure with cloud for the best of both worlds; security and flexibility. The infrastructure is built on enterprise components from HP, IBM, Cisco, Netapp and VMWare, and uses SSD drives and Fusion-io components for performance. It has a geographical proximity to major capital markets in 420 milliseconds or less, including key financial extranets and market data feeds located in the Equinix NY4 facility in Secuacus. Fibermedia also has SSAE 16 and SOC2 certifications and comes with a 3-nines availability SLA. The infrastructure can be monitored 24/7 through a customer portal.
Specs aside, the company has built a low latency offering that mixes private, virtual private and public cloud infrastructures, recognizing that a hybrid approach is key for the financial world. It leverages cloud where appropriate, and physical infrastructure where it's not. One key consideration is the flexibility of integrating existing infrastructure with Financial Flexcloud. The reality is that most enterprises aren't ready, willing or able to migrate over to cloud in one shot, so rather than shoehorn them in, Fibermedia works with financial firms on their terms.
Fibermedia's roots means its focus is on providing the infrastructure behind the financial vertical, rather than the more software-oriented approach of FinQloud and NYSE Technologies Community Platform. The company located its data centers with financial services in mind, clustering its data centers around the financial hub of New York. Its roots as a facilities provider means it has a long track record of providing certified and compliant multi-tenant infrastructure, coupled with market data in the cloud. One arguable advantage it has over the other offerings covered in this article is in managed services. There's more hand-holding available here than with the ecosystem-centric financial cloud offerings. It's in the business of bundling colo and cloud, and on ramping enterprises to the cloud.
How Colocation Providers Have Targeted Financials
Many colocation providers have adjusted to include cloud, or cloud connections, as part of their strategy. Equinix offers private hubs where exchanges and traders can share data, trading software, and route orders amongst markets.
Equinix has built a stable of financial customers over the years, creating an impressive global trading ecosystem where a variety of firms, funds, and market data suppliers connect inside neutral, open marketplaces. It offers colocation in the top 16 financial world markets, and its big sell is on-campus network connections to new partners as well as direct connects to cloud providers like AWS. It's decidedly more hands-off than Fibermedia when it comes to managed services - Equinix focuses on its core competencies of colo and interconnection - though it does offer access to experienced financial infrastructure deployment specialists and advanced consultancy aide. The advanced consultancy offering differentiates between High Frequency Traders (where latency is primary concern) and Low Frequency Traders (where minimizing cost and optimizing stability are the primary concerns).
It focuses on the ecosystem of financials within the data center, Platform Equinix (the ecosystem), and the attractiveness of its footprint in all the key financial markets. Direct connects to trading partners and exchanges, fixed-rate cross connects and thousands of FIX connections are all part of its financial services story.
Telx is another data center services provider specifically targeting financial services, and is the infrastructure and connectivity provider to a number of financial services offerings. These firms have direct access to market data, with Telx's facilities strategically located near major financial hubs like Chicago and New York City. It looks to provide the low latency trading infrastructure and connectivity services behind financial services.
A few customer testimonials speak to the benefit of setting up a private cloud within a Telex facility for things like back-testing and simulation rather than running them on public cloud. A strength in interconnection - the ability to interconnect between Telx facilities, other facilities and direct connect to AWS - are all part of its value proposition.
Savvis also has a sizeable and growing ecosystem of financial services clientele. It offers infrastructure—both colo and cloud--low latency data feeds and managed services to the financial world, as well as a hosting platform tuned for financial firms through collaboration with Thomson Reuters. The Thomson Reuters Enterprise solution suite compromises of low latency market data, aggregated data feeds, middleware and execution capabilities. It also provides analytics, and connectivity to Savvis’ ecosystem of financial markets participants within its datacenters.
Across a global footprint, the company offers proximity hosting, extranet connectivity, market data feeds, and instant messaging compliance as part of its value to the financial vertical. The company’s NJ2 Weehawken, NJ datacenter, in particular, is a thriving hub of the financial world.
The Growth of Financial Clouds
Why are so many financial cloud services rising up? Increasing margin pressure, for one, has many in the financial world looking for cost-effective solutions. SEC rules calling for reduced cost and complexity going forward may prompt many firms to look toward cloud. The Dodd-Frank reforms had many players leaving banks to start up their own firms, and cloud was the perfect opportunity to hit the ground running without big up-front capex considerations; plus it's highly scalable for future considerations. The result is data center providers tuning their financial vertical-targeted offerings to suit the demands of a world that is increasingly adopting cloud.
Financial services from NYSE Euronext and Nasdaq both offer high security. NYSE Euronext built its service with an understanding that security considerations extend beyond customer data, to intellectual property, trading strategies and other highly proprietary components found in the finance world. Its financial customers need to push high volume with low response time, and in predictable fashion. FinQloud minds all the regulatory Ps and Qs.
Cloud hasn't exactly been a stranger to Wall Street over the years, as cloud resources have often been used for compute-intensive risk analyses. This was just the dipping of toes to test the waters. The use of cloud is expanding; those initial forays have led to an increasing amount of functions and systems heading over as the technology evolves to provide increasingly secure solutions. The financial world is going cloud, so data center providers are positioning in light of both opportunity and threats from direct financial cloud offerings.
A vertical-targeted approach is being adopted all along the Internet infrastructure chain, and a cloud story is imperative, whether it be in-house or connected . By targeting specific markets, it brings comfort that a provider is equipped to handle the unique needs of a given vertical - in this case the financial world. It also helps differentiate a provider in a cloud market that's growing increasingly crowded, making it harder to stand out from the pack. The term "ecosystem" has been tossed around a lot these past couple of years, but it's a very viable concept, not just a buzz word. Financial customer colocation wins have often come in clusters, even predating these programs, with players in the financial vertical often desiring to be close to one another. These financial cloud services just make that inherent desire official, and go a step further to tailoring to their needs.
Vertical industry ecosystems are on the rise; both from financial services providers and Internet infrastructure providers looking to stake their territory.