By Brian Ross, CEO, FIX Flyer
Virtually all industries have benefited from widely available cloud-based applications such as Salesforce, Dropbox and Slack. These tools have become ubiquitous not only because of the attractive on-demand pricing model, but also because they simply work better than what was available before. The Cloud offers turn-key deployment, headache-free management, universal access from inside and outside the company’s network, and ultimately engenders a radical degree of collaboration and sharing. These same benefits are driving a watershed shift in solution implementation and deployment for financial services applications, from FIX connectivity and OMSs to monitoring and reporting.
Cloud-based offerings are becoming mature at an apt time. Today’s financial services firms are under pressure to fulfill increasingly complex and demanding regulatory requirements. Depending on your region and corner of the industry, RegNMS, MiFID, Reg SCI, Sarbanes-Oxley, Dodd-Frank and more may have something to say about what you do and how your track it. More data needs to be stored, it has to be transparent and accessible across systems and departments, and it must be digested and reported on frequently. Often monitoring and reporting solutions must be independent of core trading platforms to provide an independent and untainted view of the underlying data.
Historically, many financial services firms have avoided the Cloud out of concerns around security and privacy. Technology has caught up, and today there is a range of platforms and services designed to meet the specific needs of the industry. Major cloud vendors including VMware, IBM, Microsoft and Amazon offer cloud infrastructure solutions engineered with robust encryption and security features. The stage is set for the industry to adopt the Cloud in a big way. TCO is a fundamental part of the story, but there are other strategic benefits firms can realise.
Strategic Benefit 1: Division of Expertise
Even modest IT projects require a deep and varied skill set; networking, fault tolerance, redundancy, system administration, intrusion detection, performance optimisation, and so forth. Technologies in each of these areas are evolving quickly, putting a burden on firms to acquire deep expertise across skill sets to implement robust solutions.
Cloud and managed service solutions allow firms to capitalise on the best-in-class skills and practices of highly specialised vendors, embodied as turn-key products. Infrastructure-as-a-Service (IaaS) vendors specialise in data availability and server optimisation. Platform-as-a-Service (PaaS) vendors provide besto-f-breed security and application management. And higher up the solution stack, FIX-as-a-Service like FIX Flyer are experts in platform integration, connectivity management, on-boarding and certification.
Consider how the on-demand market data service from Xignite is solving a challenge that many firms face. Xignite provides Data-as-a-Service (DaaS) including normalised security definitions, corporate actions, pricing, market listings, and other information. Accurate and timely security master data is a requirement of many financial applications. Maintaining this data is complicated and expensive. At the same time, the data is essentially a commodity that does not itself create competitive advantage. It makes sense for firms to subscribe to this data within the Cloud and apply their own resources to more value-creating activities.
Division of expertise is straight from a page of Business 101 – focus on what you do best, and let others do the rest. Concentrating resources and management attention on activities that add core value ultimately make a firm more innovative and competitive.
Strategic Benefit 2: Leverage the Ecosystem
The Cloud is not a single “thing” – it is a paradigm of service delivery that allows firms to pick and choose the right components for each part of a solution. PaaS solutions productise the operating platform for your applications, from virtual servers and storage up through the operating system. IaaS solutions commoditise the provisioning of hardware, data storage, and network connectivity. Now, Software-as-a-Service vendors are increasingly offering cloud-enabled applications like Order and Execution Management Systems, Managed FIX Services, Trade Surveillance, Trade Reporting, Security Master and Market Data.
Like any network, the Cloud becomes stronger and more useful as more connections are formed and more applications become available. For instance, as Apple sells more iPhones more developers invest resources in developing iOS apps – which then encourages consumers to buy more iPhones. Today the roots of such an ecosystem have taken hold in the financial services industry.
One example of such an ecosystem is the Cloud Exchange offering from the data center provider Equinix. Their community cloud platform integrates with PaaS providers such as Amazon Web Services (AWS) and Microsoft Azure, but is hosted in a data center with other cloud participants just a cross-connect away. This proximity and seamless connectivity between various cloud providers allows participating firms to essentially create a hybrid cloud model with private and ultra-fast connectivity to various flavoured counter parties including those in the electronic trading ecosystem. As more firms join the cloud, this creates growing opportunities to cross-connect to one another for different solutions within a data center or scaled amongst geo-diverse sites.
Specialised cloud technologies such as these are specifically designed to address the unique needs of the industry. Comprehensive security, entitlement and auditing capabilities are now becoming commonplace. These solutions are built ground up with InfoSec compliance built in, making it easy to clear what was once a major hurdle for any IT project.
Strategic Benefit 3: Business Agility
Ultimately, leveraging cloud services allows a firm to deploy solutions faster and with fewer resources. And then after the solutions are operational, cloud and managed services allow them to scale flexibly and operate more efficiently. In today’s competitive market, speed and agility are critical sources of competitive advantage.
Regulations and compliance requirements frequently impose new demands on firms, such as increased trade reporting and data transparency. Growing business opportunities lead to more counterparty integrations, FIX connections and drop copy destinations. A cloud strategy provides the foundation for growth and scale without heavy up-front investment of time or resources.
One way the Cloud makes firms more agile is by facilitating on-demand managed service relationships. Managed FIX vendors operate FIX infrastructure on a shared cloud environment. These vendors can manage FIX sessions, on-board clients, monitor connections, perform conformance testing services, and provide a host of other services. Under this model, firms are freed up to work on initiatives that are in line with their core competencies.
The Cloud also enables an agile build-and-deploy model. Consider the situation where a firm needs to conduct a proof-of-concept ahead of making a buy decision, for instance the deployment of a new FIX monitoring tool. Because the data is in the Cloud, a vendor can easily deploy a new environment, much like buying an app from an app store. Then, if all goes well, readying the system for production is much easier and faster than it would be with a self-managed platform: InfoSec, High-Availability, Disaster Recovery, additional compute power and more bandwidth are all essentially services that already exist within the IaaS / PaaS environment.
Agility is a competitive differentiator for firms of all sizes. For smaller firms, a cloud strategy provides instant access to resources and technologies that allow them to keep up with the bigger players. And for larger firms, on-demand cloud technologies simplify projects and greatly compress go-to-market timelines, leading to better responsiveness to market needs.
An ongoing expansion
A cloud strategy is about more than keeping costs down. It enables firms to leverage productised platform solutions that radically simplify complex technology projects. It leads to an ecosystem that allows simpler and faster connections to counter parties, and simple integration with vendor services and applications. And it drives agility and velocity so firms can be more nimble and reactive.
As cloud adoption expands, we can expect these benefits to compound. Mature cloud platforms in more consumer-oriented spaces such as Salesforce and Amazon Web Services (AWS) provide good indications of where things will go. As more financial services firms are in the Cloud, vendors will develop more capabilities for the Cloud. Evaluating and deploying sophisticated and specialised financial services applications and resources will be as simple as buying an app from an app store. Firms will have instant access to market data, order routing services, risk management tools, trade support applications, and everything else we can imagine.
By Brian Ross, CEO, FIX Flyer