The Future for Adopting Trading in the Cloud

Key Takeaways

Trading in the cloud is becoming more viable for capital markets firms as major providers invest in financial market infrastructure, but adoption remains selective. The strongest near-term use cases are order routing, trade reporting, analytics, disaster recovery, scalability, and data-driven workflows, while ultra-low-latency execution still presents practical challenges.

If the picture of cloud adoption by trading firms and market services providers is a little grey today, is the outlook brighter tomorrow?

A survey of 20 capital markets organisations commissioned by Rapid Addition and conducted by A-Team Group, suggests the mixed appetite for public cloud could change if one of the major providers made a significant play for the financial markets. The whitepaper called Trading in the Public Cloud—Attitudes to Cloud Adoption in Capital Markets summarises the findings and outlines key insights.

“I still wonder what would happen if, say, Google came in and made a play for the entire global FX marketplace,” said one respondent. “But could they be bothered?”

On the surface, it appears that Microsoft could be bothered, considering its 4% investment in the London Stock Exchange Group (LSEG) and the potentially transformative shift to cloud hosting that could usher in. The initial emphasis of the LSEG/Microsoft arrangement is on back-end architecture and integration of LSEG’s processes with Microsoft’s applications, particularly its Office suite, but both partners suggest that could come further down the line.

Not to be outshone, the CME Group will spend $60 million this year as part of its ongoing project with Google to migrate key parts of the exchange’s infrastructure to the cloud. The Exchange claims that Google’s cloud platform has enabled it to develop new data and analytics products faster than it would have using traditional technology.

While we are seeing a quickening of adoption across the broader trading ecosystem, latency-sensitive applications, particularly in liquid markets, may never make the crossover according to some practitioners. “Very latency-sensitive markets and specific applications that are racing to zero in terms of message latency are less likely to have advantages in moving to cloud,” said one exchange respondent.

Conversely, “other applications, if engineered appropriately, will benefit from infrastructure-as-code, ease of disaster recovery, better resiliency, scalability, capacity scaling and scheduling, enhanced security and application visibility, change and innovation agility.”

But sifting value from these possibilities may itself represent a challenge as firms move forward with their cloud plans. One survey respondent warned of the need to differentiate between “false drivers; cost, perceived security, etc., and real drivers; agility, expanded toolsets and capabilities, ease of Big Data, scalability, machine learning and rapid model development.”

Added another, “The continuous collection of data on application usage will provide advantages in observed customer behaviours, allowing for continuous improvement to deliver better customer outcomes, taking advantage of Big Data and Machine Learning tools in cloud.”

In the long run, though, many believe issues around latency, performance and uncertainty of value will be overcome. “Over time, cloud providers will offer a full array of services in relevant data centres, replicating on-prem,” said one survey respondent. “Then there will be little difference and the advantages will outweigh the disadvantages.”

Along similar lines, another suggested that “If the connectivity between firms is via private network or Internet (in either case, WAN-driven), I would see no material difference between on-prem or cloud-based capabilities, and all the benefits of cloud computing would drive towards its use where feasible, assuming firms’ ability to build and manage cloud applications is mature.”

This may be why we are seeing certain aspects of the trading workflow, such as order routing and trade reporting, moving to the cloud. And while the most performance-demanding components of the value chain, such as trade execution and pre-trade risk, have some way to go, initiatives such as AWS edge services are hoping to address the latency question.

As one respondent succinctly put it: “It is inevitable that we will move to the cloud.”

But you knew that already.

Read more by downloading the full report here: Trading in the Public Cloud—Attitudes to Cloud Adoption in Capital Markets

FAQs

What does trading in the cloud mean?

Trading in the cloud means using cloud infrastructure to support parts of the trading workflow, such as order routing, trade reporting, data analytics, application hosting, scalability, disaster recovery, and operational resilience. It can reduce reliance on traditional on-premise infrastructure where performance, regulation, and architecture allow.

Why are capital markets firms adopting cloud technology?

Capital markets firms are adopting cloud technology to improve agility, scalability, resilience, application visibility, data processing, and speed of innovation. Cloud environments can also support infrastructure-as-code, machine learning, Big Data tools, and faster development of new analytics products.

Can low-latency trading move to the cloud?

Some latency-sensitive trading workflows may remain difficult to move to the cloud, especially in liquid markets where firms compete on extremely low message latency. However, less latency-critical applications can benefit from cloud architecture, and edge services may help address performance constraints over time.

Which trading workflows are most suited to the cloud?

Order routing, trade reporting, data analytics, customer usage analysis, disaster recovery, and scalable application services are among the workflows most suited to cloud adoption. The most performance-demanding areas, such as trade execution and pre-trade risk, may require more careful evaluation before moving to cloud infrastructure.

As electronic markets continue to evolve, firms need a flexible electronic trading architecture platform that supports rapid workflow deployment, seamless connectivity, and high-performance execution. The RA Platform empowers financial institutions to orchestrate and automate trading processes while maintaining full transparency and operational control.