By Harpal Sandhu, CEO of Integral
Google’s $1 billion investment in derivatives exchange CME clearly shows that momentum behind cloud in capital markets is building, and quickly. With big names such as Google establishing a foothold in the space, it signals that cloud is the future of market infrastructure. There are multiple reasons to believe that firms are shifting towards this technology as a central component of their technology stack.
Cloud computing has already had a significant impact on banking and our recently published research shows that the vast majority of trading in the $6.6 trillion-a-day FX markets is expected to migrate to the cloud over the next five years globally.
It’s easy to see why so many view SaaS as a strategic next step for their business. In Deloitte’s ‘Bank of 2030: Transform Boldly’ report series, cloud is recognized for helping retail and wholesale banks drive innovation and reduce infrastructure costs, as well as support improved business performance and shareholder returns. The cost-benefits are well known, and the potential to reduce cost of ownership has drawn the attention of nearly every business – not just in financial services – operating remotely the past 12 months. However, the accelerated movement toward SaaS has other benefits beyond a company’s bottom line.
From a macro perspective, cloud can act as a democratizing force for firms operating across the spectrum of capital markets globally. Why? Because it is synonymous with agility and flexibility. The lower costs, coupled with high-quality technology provided by specialist private and hybrid technology partners, enables regional and national institutions to compete and win on a global scale. Each institution, no matter their size, ends up with access to top-tier technology automating workflows to meet unique business requirements, while also maintaining rigorous standards to meet technology needs in a timely and efficient manner.
Digging deeper into the operational benefits, in today’s hyper-competitive environment where low latency is critical, connectivity and software hosted on private cloud has already proven its value to countless participants. Hosting in key data centers close to liquidity providers and having the appropriate hardware and network stack are both important for achieving low latency – and are perfectly accommodated by a single-tenant environment. For less time dependent workflows, such as post-trade analytics, public cloud is sufficient and has the same cost benefits, but private and hybrid set ups can enhance liquidity sourcing, price discovery, risk management and pre-trade analytics.
Judging from the size of the Google investment in CME, the future is cloud-based, and for good reason. Looking ahead, expect to see more developments on cloud, not just from public providers but from hybrid and private cloud firms also. It will be with these technology providers that market participants can gain the edge, modernizing and growing their business along the way.