The Connectivity Arms Race: The Cloud, Extranet and Capital Markets (by By Ralph Achkar, Colt Capital Markets)
When the public cloud first came onto the enterprise networking scene, a lot of companies needed to be sold on the concept, and why its ubiquitous, easy-access hosting and storage spaces were right for them.
Today, most enterprises and industries have jumped on the cloud bandwagon wholeheartedly – or, at the very least, mapped out some kind of cloud adoption strategy for the near future. In fact, global business spending on cloud services is expected to nearly triple by 2019.
However, the capital markets space has been historically resistant to make the same leap. But, today’s cloud is a far cry from yesterday’s, and it’s only picking up more momentum.
The cloud can be an important part of the infrastructure supporting capital markets firms; but, it must be approached in the right way. One of the stumbling blocks to that goal may be old misconceptions of what the cloud can do.
The (Old) Problem with the Cloud
It wasn’t that long ago when hesitation toward the cloud and its potential security, performance and reliability implications was widespread.
This is especially true for public cloud platforms – and still is, to an extent. As an example, Microsoft, Amazon and Google’s clouds may have over 99 percent SLAs, but their uptime, security and overall performance fall into their hands, not yours. Not having direct control over their own assets was a deterrent for many enterprises, especially when everyone was already conditioned to have that control in their traditional infrastructure setups.
As such, capital markets were a notable hold out. Strong, secure and reliable connectivity lies at the heart of capital markets. While firms might not want to move their trading applications or price-sensitive engines to a public cloud anyway, their hesitation toward the cloud kept them from thinking about certain applications or business areas that could be moved to the cloud.
The Hybrid Approach
But, times change, technology improves and new priorities present themselves. The same is true for the cloud.
Today, capital market firms have a range of deployment options – from still hosting in their own data centers over a completely dedicated setup, to using private cloud models, to using hybrid models that may move some applications to public clouds while keeping others in private platforms. All of these choices offer different levels of the control, security, transparency, performance and connectivity models that suit the different needs of capital market participants today.
Now, we see capital market firms finally moving in the direction of the cloud, in part thanks to these new options, but also due to the changing priorities where flexibility and cost efficiency is higher on the agenda. The increasing need for more flexible and elastic solutions is also driving overall connectivity and network needs. The rise of the cloud has occurred in tandem with the rise of software-defined networks (SDN) and network function virtualization (NFV), creating more flexible, scalable networks where traders can increase bandwidth when necessary, suited to their connectivity needs.
This next-generation approach to networking – virtualized, agile, elastic and cloud-based – is forcing capital markets to revisit and retool their connectivity strategies, and for the better.
Cloud Connectivity via the Extranet
MiFID I effectively kicked off an “arms race” of connectivity to new locations, where speed was no longer a fixed parameter. Now, everyone is vying for the best in high-speed and deterministic-latency connections. And, if they don’t get it, they’re at a competitive disadvantage to everyone else.
Financial extranets are helping to bridge the gap between the connectivity needs of capital market firms and cloud environments, easing those old concerns about security and performance with fast, easy-to-manage and cost-efficient connections to market data feeds and global trading venues.
The dedicated financial extranet is becoming the lynchpin to today’s capital markets ecosystem. Extranet services facilitate efficient connectivity to entire communities of service providers, markets, trading firms and potential new customers, expanding the capital markets ecosystem and enabling more widespread global connections.
Flexibility, scalability and cost-efficiency can be provided through an extranet connectivity model to an ecosystem of providers, mirroring the characteristics required for cloud-based solutions.
The Next Generation of Connectivity
The capital markets space will not win points for being an early adopter of cloud. But, what’s important is that capital market firms start considering the benefits of cloud-based solutions now.
Next-generation connectivity solutions will mirror the capabilities of cloud-based solutions. Firms that are lacking in this area, because of more static networking capabilities, will find themselves with severely inhibited performance. Financial extranets that enable cloud access ensure that all of the major providers – from trading platforms to exchanges – are more efficiently accessible with their users.
To be competitive in the connectivity arms race, capital markets participants and providers need the resources to stay ahead of the pack. That means cloud. That means SDN and NFV. And, that means extranet.
The deal shows the cloud is ready for the most mission-critical applications.
The expanded commitment will bring Nasdaq closer to moving its markets to the cloud.
RQD said it offers the first clearing platform built entirely on cloud-native, real-time technology.
Existing financial data management and analytics solutions are based on legacy technologies.
The RQD platform supports U.S. equities, options and ETFs.