Unlike many other markets and asset classes, FX is ideally placed to benefit from the characteristics of cloud computing. Why is that?
VS: FX has a long history of electronification, and more standardized instruments and workflows compared to other asset classes. Despite this, it’s also a business that’s constantly evolving – whether it be due to market conditions, regulatory conditions or client demand for specific products.
This means FX is ideally suited for cloud-based systems, because they provide much faster deployment and time to market, as well as a more agile upgrade/enhancement cycle. An ever-evolving business requires a technology stack that keeps up with industry best practices. Finally, you can’t ignore the importance of cost control and the impact this can have on profitability. SaaS partners like Integral are able to offer significantly lower total-cost-of-ownership (TCO) for a technology that is highly configurable, thus enabling FX desks to do what they do best – serve their customers, manage FX risk, and optimize their participation in markets as per their needs.
What advantages does utilising Private Cloud connectivity offer to firms who need more flexibility in dealing with inconsistent trading traffic and rapid volume swings?
DB: It is important that financial firms know that there are several types of cloud technologies available, and that the private cloud is generally more suitable for organisations that would like to have greater control over their IT infrastructure. This way, if a problem occurs – such as downtime caused by inconsistent trading traffic – organisations can easily make adjustments and drive efficiencies.
They can also monitor infrastructure and processes to maximise efficiency and be able to predict problems before they happen. Another advantage of the private cloud is that it can be customised for a bespoke fit to perfectly match an organisation’s requirements. This means IT teams can confidently deploy infrastructure to offer FX traders flexibility.
What is Crux’s role in the financial data ecosystem and how are you integrated into FX data management?
PB: Crux is a cloud-based data delivery and operations platform with the mission to connect data customers and suppliers around the globe. Our simple, reliable and affordable cloud-based solution enables suppliers to deliver and provide accessibility to thousands of datasets including FX data.
We currently partner with close to 90 data suppliers, including leading FX data providers. Crux works with other cloud-based platforms, such as AWS and Snowflake, with flexible delivery methods to offload data. Our customers realize benefits, such as efficiency and cost-savings that help improve overall data consumption.
Do you think we are starting to reach a tipping point in the adoption of the cloud by FX trading firms?
VS: I think we have already reached the tipping point. First, the speed of budgetary and regulatory pressures in the past few years have increased in pace, and the result is that even conservative institutions like central banks are looking to cloud technology as a credible option. They recognize that building software from scratch opens the potential for unnecessary complexity and increased exposure to technology and business risks.
In an environment, where everyone must do more with less and the technology requirements keep evolving every quarter, the debate on whether cloud computing is necessary is effectively over. Finally, I should mention that with all of us having to work remotely during this ongoing pandemic, those institutions that have been managing their eFX business in the cloud have been able to work effectively in a distributed and remote fashion. There is now clear evidence of how powerful and even necessary cloud technology is.
There are many benefits to using the public cloud, but what are the risks for FX traders?
DB: When cloud-based technology was first introduced to the market, the financial services industry was cautious towards its adoption. Concerns over the technology for FX traders were justifiable as the threat of exposure to cyberattacks, hackers and viruses ran high. Questions of trust around resilience, cybersecurity, regulatory compliance, quality of providers and customer service all helped contribute to slow cloud adoption. Fast forward a few years, and the security capabilities delivered by public hyperscale cloud infrastructure providers are now so comprehensive that it is difficult to argue that the use of these cloud providers would degrade security or increase risk. In fact, the likelihood is now that public hyper-scale cloud usage increases security and mitigates risk for FX traders.
Why are increasing numbers of FX trading firms considering a cloud-based future for their market data management requirements?
PB: The migration of FX data management to the Cloud provides more scalability and flexibility as well as a growing array of tools for consumers to process, ingest and consume data. Similarly, by adopting the Cloud, these tools are available to the FX trading firms themselves, which enables data analytics to improve their own data.
FX trading firms realize the strategic value of data, both as inbound data which helps improve their trading strategies and operations, and outbound ‘exhaust’ that can provide value to customers and potential new uncorrelated sources of revenue. Cloud technology gives firms the ability to scale the size and cost of their data operations smoothly, making the decision to gather, host, and deliver far more data easier than there would have been in the past, when you needed to make CapEx decisions to grow your hardware footprint and hire and manage more data center operations staff.
Cloud technology also provides firms with tremendous agility in order to react to market opportunities quickly and leverage a broad and growing ecosystem of third-party data manipulation and analysis tools. Crux uses the inherent agility of Cloud technology to offer a wide-range of data delivery methods, including a RESTful API, a Python client, targeted S/FTP and automatic upload of data updates into a variety of data warehouses and analytics platforms.
In what ways can private clouds and connections help to optimise infrastructure Return on Investment (ROI) for FX trading firms?
DB: One of the attractive qualities for IT teams about cloud technologies is that it promises to be more cost-effective. IT infrastructure is typically one of the highest costs for organisations, but IT teams can leverage a private cloud to achieve better ROI. Private clouds can further help to optimise infrastructure ROI through IT teams not having to accept the default settings. Instead, FX trading firms can customise the technologies to suit their traders’ needs. They can also remain vigilant about the resources that are being used.
Why should sell side firms and banks in particular position the cloud as a core strategy to make their FX technology more competitive?
VS: To serve your customers and serve them well, half the battle is simply having the right systems and infrastructures in place. Being competitive means keeping up with changes of all kinds – regulatory requirements, client demands, product changes, and unpredictable market volatility. These changes affect sell-side firms in a highly significant way because the only way to compete and win in electronic workflows is having flexible and scalable technology that enhances what makes you unique in your market. From the customer facing platforms to work-flow automation to risk management tools, banks need technology that can be configured to suit their specific business flows while enhancing their differentiation. Sometimes people confuse having a competitive edge – or protecting their ‘secret sauce’ – with having to build proprietary solutions on premise. This could not be further from the truth. Cloud computing when done right gives you best of both worlds where you can be both agile and unique.
The Cloud has facilitated the emergence of rich collaborative ecosystems for many financial market communities. What makes these attractive for FX trading firms and how are they likely to evolve over the next few years?
DB: The financial markets are heavily dependent upon connectivity throughout the trade lifecycle and having access to a readymade, diverse ecosystem of participants is highly attractive for FX trading firms. Every financial firm is interested in growing its profitability and enhancing its services to clients, and the cloud facilitating rich ecosystems has been the perfect result. Every aspect of the trade lifecycle – from order creation to order placement to trade execution – are all heavily dependent on connectivity and communications. Looking to the future, generating alpha is becoming more challenging, so cost-effective communications infrastructure and technology solutions will make it easier to provide the connectivity and ecosystem needed to succeed.
How flexible in practice are Cloud services for managing data and what other options for managing data are available, other than a wholesale adoption of Cloud computing?
PB: Cloud services simplify data management and enable flexible consumption and management, particularly in finding the right data sources, ingesting data and the use and analysis of the data.
With cloud-based solutions, data consumers have more powerful tools at their disposal. For example, machine learning and database warehousing can improve how companies process and consume the data. When working with sensitive information, a hybrid approach of combining the cloud services for unrestricted data with local computing may be feasible when there are certain restrictions on storing client’s data on the cloud. Crux can ingest data from Cloud or non-Cloud data sources and can deliver data into a customer’s Cloud or non-Cloud data warehouse. Although Crux uses Cloud technology to gain maximum efficiency, agility, and resiliency, we do not require either data suppliers or data consumers to be on the Cloud. We realize that customers are in various stages of migration and our goal is to be flexible in meeting them where they are in their journeys.
Many banks have workflows that must be tailored and made bespoke to accommodate their existing front-end business practices and back-end processes? How much of a problem, if any, does this present from the cloud perspective?
VS: It is indeed true that every bank has bespoke requirements in terms of how they conduct their business with their customers and associated workflows and processes in front, middle, and back offices. We at Integral see this with every client. The reason why it’s not a problem is because a well-architected cloud technology stack will provide infinite ways to configure a system and do it efficiently. Of the 200+ clients using Integral solutions, we find that every single technology deployment is different from the others. Our clients succeed because there is enough freedom within our technology stack to put together a workflow that fits their exact needs. They’ve essentially acquired a bespoke system while benefiting from all the characteristics of cloud computing.
Where can we expect to see the Cloud being leveraged by participants in the fast-growing cryptocurrency market?
DB: Ever since the advent of cryptocurrencies, competition was underway to discover cheaper yet more efficient machines. As more people have ventured into the world of cryptocurrencies, the value of the currency obtained for finding a hash has not justified the amount of money spent on setting up the ASIC machines. Consequently, we can expect to see the power of cloud computing being leveraged by financial market participants in the form of cloud-based mining. This type of cloud mining will enable participants to mine cryptocurrencies, such as bitcoin, without having to manage the hardware.
The Cloud enables collection in real time of huge amounts of standardized data which can then be analysed. Is the beneficial impact of this going to be felt equally across the entire industry or will the consequences be greater for the sell-side rather than buy-side?
PB: The Cloud allows companies to innovate faster, differentiate their business, and improve customer experience. I don’t believe that consequences will be greater for the sell-side rather than the buy-side; both parties will benefit from the cloud services, albeit in different ways.
Cloud computing has been evolving fast over the past 5 years. What steps have leading providers been taking to ensure they can now guarantee high reliability and ultra low latency access to FX market counterparties?
VS: Integral was certainly a pioneer in bringing cloud technology to FX and during this time we have seen the capabilities of cloud evolve. We don’t have the ‘square peg in a round hole’ issue that you will often find with vendors who embraced cloud later in the game and tried to retrofit their systems to cloud. From hardware, software, and network layers, our systems are built from the ground up for ultra-low latency and high reliability in the cloud environment.
Are there any important lessons that FX can learn and take away from how the Cloud is being leveraged for data management in other asset classes and industries?
PB: Many financial services companies are utilizing Cloud computing to meet the regulatory requirements for the timely risk reporting across multiple asset classes. The upcoming Fundamental Review of Trading Book (FRTB) regulations will accelerate the adoption. Any asset manager can consider going to the Cloud for similar reasons - scalability, organization, client demand. Given consumers are adopting the Cloud, it is crucial for FX providers to do so as well. All asset classes and industries have different trading specifics and regulations, however the FX market is very segmented with no central marketplace, creating many market players and different venues, which adds an additional layer of complexity.
How can existing Cloud services be further improved to increase their value proposition in FX even more?
DB: The COVID-19 pandemic has dispersed traders around the world and forced the majority to work from their living rooms instead of official, highly regulated trading floors. The focus for how cloud services can be further improved to increase their value proposition in FX will be on how they can continue to power the financial markets in these unprecedented times. The job of migrating from in-house to cloud-based services will likely grow exponentially in the years to come. FX trading firms will be looking to see which providers can ensure strict regulatory and compliance procedures can still be followed while the workforce exists remotely.
In what ways might cloud computing technology transform the way FX is traded by breaking down barriers and creating new trading communities?
VS: The recent launch of TrueFX is case in point. We have been able to deploy – at an incredibly fast rate – an award-winning platform that offers low-cost, convenient trading to the buy-side. We could provide this by offering fully integrated credit intermediation and integrated technology in a cloud environment. The buy-side can also use TrueFX technology and trade on the venue at zero cost.
We were able to offer this discount because our cloud technology already runs at scale and we were able to configure the system in a short amount of time to create a transformational venue like TrueFX. SaaS is a powerful trifecta of cheaper, faster, better. Institutions find they can actually innovate much faster at a much lower risk and cost, thanks to cloud platforms. In every industry, when the cost of trying out new ideas collapses, innovation blossoms. This is what we are already seeing in the FX markets.
The current crisis, Covid 19, has had a massive impact on our industry. In what ways, and to what extent has this impacted the delivery and consumption of data?
PB: We’ve seen some uncertainty, but also an increase in interest in data consumption. Many of the data suppliers we work with have reported that their businesses are up during this period. It is hard to know exact causation, but I believe that COVID is playing a role of an accelerant across major trends that were already in play - i.e. moving more to online, migration to the cloud, being more fragmented in our work environments. The drive for consumers to consume more and more data was already a trend, and now we’re seeing it surge.
The FX market includes a wide range of participants, such as banks, asset managers, brokers and hedge funds etc. What factors should influence their choice of suitable cloud provider to partner with and will there be significant variation according to each type of firm?
VS: The basics are the same. Factors include having a track record, granular configurability, reliability of systems, and comprehensiveness of functionality. You also want to look into availability of real-time metrics, quality of onboarding/business support, connectivity with front- and back-office processes, and time-to-market - that is, the time required to set up and go live Most of all, you must have confidence that the technology can reflect your unique characteristics and competitive advantages and the provider has the track record of being your trusted technology partner.