The introduction of cloud computing technologies is altering the way several of the world’s top financial exchanges conduct global capital markets.
Nasdaq and Amazon Web Services announced a similar partnership a month later. AWS will collaborate with Nasdaq over the course of several years to migrate the latter’s North American markets to the cloud.
CME Group signed a 10-year agreement with Google in November to migrate its IT infrastructure and markets to the cloud. This, according to CME Group, will allow it to introduce new goods and services considerably more swiftly.
According to Adrian Poole, head of financial services at Google Cloud UK, traditional institutions like financial exchanges are lured to cloud infrastructure because they want to “expand market access” and “streamline processes.”
But, as Poole points out, cloud adoption isn’t only about bettering infrastructure. He points out that global corporations, such as CME Group, are leveraging cloud computing’s increased processing capacity to “meet client demands in new ways” and “drive transformation.”
He argues that they can achieve these goals because cloud technology is versatile and scalable, allowing businesses to scale capacity up or down at any time.
“The vast amount of computing power that the cloud offers means that data analysis can happen at lightning speed,” he explains. “This means that, when it comes to firms wanting to do things like risk management, it can be done in real time — adjusting by the minute to factors such as legal liability and financial uncertainty.
“Organisations can use these capabilities to their advantage — for example, using this data analysis to create automated tools that can help mitigate risk.”
Cloud computing also provides a range of security and privacy benefits for financial institutions that hold vast amounts of sensitive data — and have become prime targets for cybercriminals. Poole says cloud providers are able to meet the need for continuous risk monitoring and regulatory compliance by adopting practices such zero-trust models. These ensure that all user identities — in, or out, of a network — are verified.
In addition, customer data are protected by the engineering principle of ‘redundant design’, where critical system components are duplicated to provide back-up and increased reliability. Spectrum Markets, a pan-European trading venue for securitised derivatives, uses cloud computing for storing and analysing data. The company’s chief executive, Nicky Maan, says the most significant benefit of cloud systems is how they allow digital infrastructure to be used for accelerating business growth.
“It is really easy to extend the cloud resources you use, as and when required, because the storage and processing of data are not dependent on traditional in-house hardware capabilities. You can simply rent the additional capacity you need. “This can even run automatically, where your system detects it needs more capacity and immediately acquires additional resources,” Maan notes. “So, if the number of financial products listed on your venue grows from, say, 2,500 to 100,000, you don’t need to install new systems to store all the data or scale up your analysis capacity to handle the additional volume of information.”
“Saying ‘my supplier went down’ isn’t a valid excuse to the regulator,” he emphasises. “So, you need to be able to switch your supplier to another one if they continually let you down.” But, because switching between two cloud platforms is an arduous task, he recommends that financial exchanges keep “complex, integrated and time-sensitive systems” on hardware-based infrastructure instead.
“That includes having full control on latency — or the speed of information transmission required for accurately pricing financial products — as well as the ability to transfer any outsourced part of your infrastructure to another provider in the event something goes wrong,” Maan explains. Financial institutions outsourcing their technical infrastructure to a cloud provider like Amazon, Google or Microsoft, however, must ensure systems comply with industry regulations, such as those set by the UK’s Financial Conduct Authority and the US Securities and Exchange Commission.
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