Market Data in the Cloud
The Broker Club 2024 - Report Extract
The financial services sector is seeing new market data solutions emerge with the increasing use of cloud-based data distribution, benefiting larger investment banks and newer retail brokers through its flexibility, scalability and cost-efficiency.
In today’s capital markets, dynamic, scalable, disposable infrastructure is required to support complex workloads. Cloud networking in financial markets is a common approach to achieve this, however, it presents unique challenges, particularly in maintaining high performance and reliability. The use of cloud computing can also lead to unintended consequences such as lack of control and greater vulnerability to cyberattacks.
There is a growing demand for new market data services coming from fintechs, new brokers, and retail brokers, driven by the need for direct access to data sources for regulatory compliance and operational efficiency. Financial institutions are also increasingly seeking cloud-based solutions for centralised business intelligence platforms and to meet the needs of globally dispersed employees. Vendors must understand and address these customer use cases, providing data in multiple geographies and formats to ensure seamless integration and accessibility.
There is increasing disruption of traditional market data infrastructure by cloud-based services and key players in the cloud services market are already providing robust solutions for financial data consumption and storage. Players in the cloud-native cryptoasset sector have readily adopted them – arguably, the sector could not have thrived without the flexibility and scalability offered by cloud architectures.
When it comes to cloud adoption in financial services, the importance of best practices for data consumption and storage cannot be downplayed. Post-trade analysis, back testing, risk assessment, and fraud detection are among the key areas where customers are adopting cloud-based data sources.
AWS Data Exchange is an example of a cloud-based data marketplace with over 1,000 data products with strategic relationships with big data providers such as Google and Bloomberg enabling direct data delivery to private networks, enhancing the value proposition for financial institutions. Ideally, firms should identify use cases, measure outcomes, and invest in developing best practices for cloud consumption to maximize the benefits of cloud-based market data solutions.
The future of cloud computing in financial services is expected to be multi-cloud and hybrid, combining the resilience and flexibility of multiple cloud environments with the complexity of architecture. For example, Nasdaq’s use of AWS outposts for a private cloud environment illustrates the challenges and opportunities of cloud networking in trading strategies, particularly in the cryptoasset space. Understanding market location and networking is crucial for optimising trading strategies and ensuring high performance.
There is a growing call for the development of a cloud-based data aggregator tailored specifically for capital markets. Such a cloud solution would address the unique requirements of the financial industry, including reliability, performance, and compliance with regulations like the Digital Operational Resilience Act (DORA). This approach would enhance resilience and reduce dependency on a single cloud vendor, addressing concerns about vendor lock-in and the need for diversity in cloud solutions.
To fully exploit the potential of cloud-based market data solutions, financial institutions must prioritise customer education and engagement. Developing comprehensive training programmes and detailed documentation can help customers understand best practices for ingesting and using market data in the cloud. This proactive approach ensures that customers can make the most of cloud capabilities while maintaining compliance and operational efficiency.
Engaging in ongoing discussions with customers about resilience strategies, disaster recovery, and regulatory preparedness is also essential. These conversations can help firms build robust cloud-hosted workloads that are resilient to disruptions and compliant with evolving regulatory standards. By focusing on these areas, financial institutions can stay at the cutting edge of technological advancements and maintain a competitive edge in the rapidly evolving financial landscape.