Cloud computing is one of the most mysterious enterprise technologies introduced in the past decade. It can mean many things to many people and rarely has a unified description. The term “Financial Cloud” which is becoming increasingly used by large financial institutions such as exchanges and banks has equally proven to be a mystery. Several large financial exchanges and financial services companies have recently launched their Financial Cloud offerings in hopes of capitalizing on this growing industry.
When digging into the primary purpose of these newly launched cloud products, you will find that they are geared towards providing proprietary services to the company’s clients and are not suitable for more than a limited range of purpose. The other issue that the financial cloud providers admit that their cloud solutions are aimed at middle and back office functions that cannot replace bare metal machines that host high frequency trading applications, algorithmic trading or low latency market data and news feeds. This is very confusing to end users and organizations looking to incorporate third party cloud services into their existing trading infrastructure. Most users of these services cannot exactly explain what these financial cloud products offer to improve or enable trading and have been forced to continue building and managing their own infrastructure solutions in-house. The major issue at hand is that today’s financial cloud offerings do not actually solve problems for today’s growing number of electronic traders that need access to multiple execution venues, market data and low latency news feeds. For the financial cloud to work, there needs to be an availability of all services ready to be connected and turned up quickly and easily.
MAKING THE FINANCIAL CLOUD WORK FOR TRADERS – THE KEY ELEMENTS
In order for the financial cloud to work, traders need to know that the service meets their requirements. The financial cloud can meet the needs of the trading community if the following requirements are met:
Location – There must be a disclosure of location and proximity to exchanges, liquidity venues and low latency market data and news feeds. Traders need to know the actual latency offered by the cloud trading infrastructure. This has been one of the key tenets of building out trading systems for the past several years and a major delivery failure of the current financial cloud model.
Low Latency – Low latency and cloud are two terms that have not been synonymous in the past. According to trading clients, low latency is a must. Low latency can be defined in relative terms but it comes down to two major factors: network latency and machine infrastructure latency. If a trading house is looking to completely replace a larger and more expensive bare-metal trading infrastructure, they need to ensure that the networking and processing latency is similar or better than their existing deployment. The common network round trip “ping” test and order “time stamp” latency must yield impressive results.
Multiple Connectivity Options – There must be a wide array of connectivity options to exchanges, ECNs, banks and market data/news providers. When investing in infrastructure, the trader needs to know that the network can connect seamlessly to trading counterparties in a cost-effective way and one that lowers the risk of not having options to trade multiple venues.
Turn-Key – The financial cloud must be turn-key and provide access to all of the common components that comprise a trading infrastructure. The cloud provider must be able to emulate a traditional hosting model that visually removes all of the complex individual components that make it difficult for a client to turn up services when they need them the most.
IS ULTRA LOW LATENCY AVAILABLE ON THE CLOUD?
If you speak to those in the know in the financial hosting business, they will rarely mix the words “low latency” and cloud. Until now this has typically been true. With advances in the operating system, network and processing technologies, the basic cloud fabrics responds faster than before. It requires a carefully constructed solution that takes into consideration all of the pieces of the hosting fabric and how they react to one another ensuring latency and networking roadblocks have all been mitigated. It is possible to run a low latency cloud in production.
As members of the financial services community expand their operations, they will seek the cost-effective and scalable promise of the financial cloud. Many traders are also leaving large regulated entities such as exchanges, ECNs, banks and insurance houses to seek trading opportunities elsewhere which is creating and increasing need for an affordable yet transparent cloud hosting solution. An ideal solution provider will offer multiple production sites running in major cities around the world, with a system capable of hosting trading operations for market makers, hedge funds, low latency trading platforms and liquidity aggregators as well as providing connectivity to numerous exchanges, ECNS and brokers.
Jubin Pejman, Founder of FCM360, is an industry leader for Financial Services Technology Facilitation. FCM360 specializes in establishing high-performance trading infrastructures for Financial companies to gain low latency connectivity to financial markets in Foreign Exchange, Futures and Equities. Learn more about FCM360’sturn key low latency network and financial colocation services