Cloud Strategy for Exchanges and Financial Markets
First Published Wednesday, 24th August 2011 02:03 pm from Xand : Joel York
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src="http://www.cloudbulls.com/wp-content/uploads/2011/08/stock_exchange-150x150.jpg"
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style="float:left;margin-right:10px;" />Each of the three
largest US exchanges, NASDAQ, NYSE and CME Group has recently
announced its cloud strategy, but exchanges and financial markets
as a group have been slow to get on the cloud bandwagon. Too slow
given the potential benefits to their customers and their own
needs to increase revenue, market transparency and competitive
advantage. That according to a recent white paper released by The
Melbourne Group entitled href="http://www.cloudbulls.com/wp-content/uploads/2011/08/the_winds_of_change_in_market_data.pdf"
target="_blank">The Winds of Change in Market Data : Winning
Cloud Strategies for Exchanges and Trading
Venues.
The new NYSE
Technologies' href="http://www.nyse.com/press/1306838249812.html"
target="_blank" rel="nofollow">Capital Markets Community
Platform is a significant and bold IaaS play that
aspires to become the Amazon Web Services for financial markets
by leveraging the tight community and unique technology needs
within financial services that so often prevent generic offerings
like AWS and Azure from competing on Wall Street. NASDAQ and CME
Group on the other hand have placed their initial cloud bets one
level up on the cloud stack with data-as-a-service offerings,
Data-on-Demand and href="http://www.cmedatacloud.com" target="_blank">CME Data
Cloud respectively.
Now that the big
three have all made claims to the cloud, it seems like only a
matter of time before each of the remaining href="http://en.wikipedia.org/wiki/List_of_stock_exchanges"
target="_blank" rel="nofollow">hundreds of stock
exchanges and trading venues around the world follows
suit with its own cloud strategy. Right? The answer is not so
clear, because every exchange is a
little different. Different markets. Different regulations.
Different customer needs. Very few have the capital and scale to
tackle the IaaS market. In fact, it remains to be seen if NYSE
can achieve anything near the automation, elasticity and scale of
AWS within the limited scope of financial services. According to
the Melbourne Group, the safer cloud strategy for most exchanges
and trading venues is probably closer to the CME and NASDAQ
approaches that use the cloud to reach new customers and monetize
underutilized market data assets.
The business
case centers around four trends that are creating significant
market data technology challenges for financial market
participants.
- Market data costs
are skyrocketing due to the expansion of electronic
trading
- New trading venues and technologies
are driving mergers and consolidations
- Transparency requirements driven by regulator responses
to the financial crisis
- Mobile technology
enables new usage patterns for market data
Altogether, these trends add up to the the exchange
version of the " href="http://www.cloudbulls.com/the-financial-services-it-crush-too-much-data-too-many-apps-too-little-time/"
target="_blank">too much data, too many apps
crush" that is being felt throughout the
financial services sector. In response, The Melbourne Group
offers up the following cloud strategy for exchanges and trading
venues.
href="http://www.cloudbulls.com/wp-content/uploads/2011/08/the-winds-of-change-in-market-data.pdf"
target="_blank">
src="http://www.cloudbulls.com/wp-content/uploads/2011/08/cloud-strategy-financial-markets-exchanges.png"
alt="" width="450" />
There
appears to be decent upside to adopting any one of these
recommendations, while the downside seems minimal. Unlike IaaS,
market data doesn't come with the high security
obstacles that are pervasive in the financial services sector.
The primary challenge is cost-effective distribution of
exponentially increasing amounts of market data and a good cloud
strategy should open up many opportunities for exchanges and
trading venues in both cost reduction of internal data management
and revenue enhancement from expanded data delivery.
[Note: This article is cross-posted from href="http://www.cloudbulls.com" target="_blank">Cloud
Bulls]
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