Today, NYSE Technologies also offers CMCP users access to its platform-as-a-service (PaaS) and storage-as-a-service (SaaS), and provides other ancillary service offerings, O’Sullivan adds. “We basically give users complete control over their computing resources and how they want to use them,” he explains.
The premise behind CMCP is to address various shortcomings that capital markets firms have with commodity clouds, while capitalizing on the cost savings that shared resources provide. “Our cloud is available in a closed community environment that is highly secure and limited to financial services firms only,” says O’Sullivan, who explains that the only way to access CMCP is through the NYSE Technologies Secure Financial Transaction Infrastructure (SFTI) global network.
Such a closed community, whose members share similar business requirements, also allows NYSE Technologies to tailor its offerings to its client base, such as providing access to market data via its SuperFeed consolidated feed, pre-trade risk controls via its Risk Management Gateway, and order routing via its FIX Marketplace. “The cloud provides the compute capabilities to run trading systems and middle- and back-office operations rather than hosting websites, online stores or streaming videos,” says O’Sullivan.
Firms can access the full spectrum of CMCP offerings in NYSE Euronext’s Mahwah, NJ, and Basildon, UK, data centers. NYSE Technologies also hosts all of its CMCP physical computing and storage offerings in its downtown and suburban Toronto data center facilities, as well as in its Tokyo data center.
According to O’Sullivan, NYSE Technologies is working to expand that access, with an eye on the Asian markets. Plans are afoot to offer CMCP services in a new facility that data center operator KVH is building in the Tokyo area, and similar plans are already in motion to serve the Hong Kong market, he reports.
WORM by Another Name
Rival exchange operator Nasdaq OMX took a slightly different spin on building an industry-specific cloud community. In September 2012, company officials announced a partnership with Amazon Web Services (AWS) to operate Nasdaq’s alternative, dubbed FinQloud, which stores regulatory data in a write-once read-many (WORM) local environment using the platform’s Regulatory Records Retention (R3) service.
Gary LeFever, a vice president at Nasdaq OMX, estimates that larger broker-dealers could see an approximate 80% savings in WORM-compliant storage costs -- dropping from $0.60 per month per gigabyte of compliant storage to $0.10 per month per gigabyte of storage. Smaller broker-dealers, he believes, could see similar savings, reducing their average $2.40 per month per gigabyte WORM retention spend to $0.45.
Nasdaq OMX plans to hit the ground running in 2013 as it clears up any remaining concerns over the regulatory acceptance of FinQloud’s R3 service, according to LaFever. “The way the rule is written is that the examining authority has 90 days to object to the new technology as not compliant, but that period ended for the first broker-dealer on the system at the end of December,” he explains. “We are now waiting for two independent examiners to finish their assessments that the technology is compliant, which should be by the end of January.”
Although Nasdaq OMX and AWS designed FinQloud and R3 to address the six-year record-retention mandate outlined by the US Securities and Exchange Commission’s (SEC’s) Rule 17a-4, officials are also getting queries from firms looking to leverage the platform to meet the five-year record-retention requirement of the US Commodity Futures Trading Commission’s (CFTC’s) Regulation 1.33, notes Ted Myerson, SVP and global head of access services at Nasdaq OMX. But Myerson sees FinQloud’s storage savings as the tip of the iceberg for users.
By moving archival data, as well as tick and historical databases, into the cloud and accessing them via R3, firms can eliminate the need for redundant storage of data -- data that is stored in WORM-compliant media, and the “live” data used in the daily operations such as data mining.
Adopting such a model would lead organizations to the “next generation” of trading, Myerson says. “We’re seeing a paradigm shift in trading as it moves from latency to big data analytics.”
Nasdaq’s LaFever expects to announce a few partnerships with independent software vendors (ISVs) for value-added services, including analytics, in the FinQloud environment as soon as next quarter. In the meantime, all of the current and future services provided by AWS are and will be available on FinQloud at the same price level, he adds. “The only thing unique to FinQloud is the R3 offering.”
They Built It, But Will Firms Come?
Since NYSE Technologies launched CMCP and Nasdaq OMX announced its FinQloud and R3 service, traction for both offerings has been rather light compared to the take up of commodity cloud services from providers such as Amazon, Google, Rackspace and Microsoft.
NYSE Technologies’ O’Sullivan declines to disclose how many firms currently use the CMCP platform, but he says that it’s in the high teens. He adds that they are using the platform for everything from market-making operations to disaster recovery, and a large firm is expected to announce that it is moving its disaster recovery operations to the platform in a few months.
According to Nasdaq OMX’s Myerson, only the original broker-dealer that began using FinQloud for regulatory storage in September is on the platform currently. There are, however, several additional users planned – including Nasdaq OMX itself, a confidential clearing firm looking to move its clearing operation onto a cloud, and a well-known regulatory entity, Myerson reports.
A possible explanation for the slow uptake of the industry clouds is the sales process. Unlike the commodity cloud offerings’ down-up adoption model, which typically begins at the hands of an impatient developer, community cloud sales are top-down decisions usually originating from a few C-level executives in the corner management suite, according to Nasdaq’s LaFever.
Another issue might be that, by trying to compete against the commodity cloud space and internally developed clouds, the hybrid offerings cannot be effective, suggests Nishant Mittal, director, product development at Rosenblatt Securities. “There’s no one off-the-shelf solution that offers a complete offering,” he says. “Commodity offerings like Amazon’s cloud are too generic and community cloud offerings focus too much on the financial needs.”
Rosenblatt Securities has spent the past four years developing its own internal IT infrastructure, leveraging open-source technology, and does not believe that outsourcing portions of its community clouds would allow it to retain its competitive position, according to Scott Burill, a partner and managing director at Rosenblatt.
The industry will always have the “build versus buy” debate, notes Alexander Tabb, a partner at industry research firm TABB Group. Acknowledging that the community cloud market is nascent, he says providers need to do a better job educating financial services executives on the benefits of industry-specific cloud environments.
“You see NYSE Euronext and Nasdaq OMX launching their respective offerings because they each have large technological footprints they are trying to monetize,” Tabb explains. “There are some technical hurdles in deploying cloud environments, and that’s why I Nasdaq OMX partnered with Amazon, a respected cloud provider.”
Tabb remains bullish on the clouds benefit for the industry, however. “The economics make sense,” he says. “But we’re not there yet.”