Cloud computing powers the world’s financial exchanges
In November, financial derivatives exchange CME Group entered a 10-year partnership with Google that will move CME’s IT infrastructure and markets to the cloud. CME says this will enable it to launch new products and services much more quickly.
A few weeks later, Nasdaq and Amazon Web Services announced a similar collaboration. Through a several-year partnership, AWS will work with Nasdaq to transfer the latter’s North America-based markets to a cloud computing environment.
Traditional institutions such as financial exchanges are drawn to cloud infrastructure because they want to “increase market access” and “streamline operations”, according to Adrian Poole, head of financial services at Google Cloud UK.
He explains that they can achieve these goals due to the flexible and scalable nature of cloud technology, which enables organisations to scale capacity up or down, at any time.
But Poole adds that cloud adoption isn’t just a case of improving infrastructure. He points out that multinational companies, like CME Group, are using the greater processing power of cloud computing to “meet customer expectations in new ways” and “drive transformation”.
“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.”
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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