Marketplaces in the cloud: It’s about much more than data
By Stacy Mallon, Director, Infrastructure and Security, Vela
Within the Financial Services industry, the recent shift to remote working has also triggered an accelerated move towards cloud-based services and solutions.
Market participants are always looking for greater efficiencies. The continued explosion in data consumption has resulted in more choices than ever before when it comes to accessing and consuming various types of data. Both factors have driven the creation of new marketplaces for discovering and buying market data, particularly on public cloud platforms. I had the chance to talk about this trend at a recent webinar hosted by FISD. But whilst data requirements may be acting as the catalyst, the main takeaway for me was that this is about much more than a new way of discovering data feeds.
The starting point for the conversation is that clients who are eager to explore diverse ways to acquire data have a lot of different drivers, many of which will sound familiar. These are objectives that most will have had for many years and are not specific or exclusive to marketplaces or market data in the cloud. These drivers may see clients looking to reduce their market data spend, achieve faster time to market, or improve processing efficiencies and performance. Some may also want a more à la carte approach to their data needs, pinpointing different datasets around different requirements.
A marketplace for market data products then? It’s an attractive notion…a place where market data can be bought, sold, and distributed in an “add-to-basket” approach. Could this really replace what can seem like a never-ending to-do list involving cross connects, leased lines, hardware, on-premise data centre environments, and complex licensing agreements?
Underlying our discussion was a simple yet important point. Whilst marketplaces for market data are an exciting prospect to allow easier access to data, they are not the whole solution. The drivers that see clients turning to marketplaces for access to data in the first place are also those that see them partnering with solution providers to assist with the age old problems of having to manage software themselves, dealing with the changes that the exchanges mandate on a regular basis, and the general day-to-day support of software and production environments. Marketplaces may provide an easier approach to procuring data, but it is those marketplaces that can deliver the added extra “as-a-Service” products and solutions to assist clients in their journey to the cloud that may really prove of most interest.
Just as marketplaces act as a mechanism for price discovery, they also provide a function as a shopfront window. Market participants thus can become aware of a wider spectrum of products and services that are available. Given the pace of change in the fintech space, it can be difficult to stay abreast of developments that may be beneficial to your organisation. But with the increased availability of data, products, and services via marketplaces hosted on cloud platforms, those opportunities become more visible.
For many firms, the notion of connecting or deploying their trading systems to public cloud environments to access these marketplace services can be a scary thought and InfoSec teams can be understandably wary. However, cloud platforms have advanced to the point where these kinds of security issues need not deter companies, even those with especially complex internal systems. For instance, firms can establish private connections to virtual private cloud environments in order to access a cloud-based service or marketplace. This ensures all network traffic remains private, eliminating the need to access the public internet and simplifying network architecture to just a single logical connection between two environments.
The concept of marketplaces does not come without its own set of challenges. The ramifications of the market-data-marketplace-in-the-cloud trend are large and likely to become increasingly apparent. Such an environment is not conducive to restrictive commercial policies or procedures on licensing or sourcing market data. Traditional vendors will be under increasing pressure to provide clear, transparent pricing that is easy to understand, something that we do already. However, it’s not only the vendors that will need to adjust. For there to be real effective change, and to enable vendors to continue to deliver innovative market data solutions, it’s crucial for the exchanges to review and revise their licensing agreements, approvals processes and pricing. Without this participation the extent of change that can be achieved will definitely be limited. Additionally, over time, the curation of the marketplaces themselves will come under more scrutiny and choice and competition will be key to ensuring fair and balanced policies and pricing. You only have to look at the recent challenges to Apple’s App Store policies and commercials as an example.
Ultimately, marketplaces in the cloud offer both clients and vendors a gateway. The ease of access to market data can be viewed as the first step towards taking full advantage of cloud technologies and services and thus creating endless new possibilities for all those involved.
At Vela we see this as an exciting development and we are hearing that more and more clients are viewing it the same way.