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The Future of Trading: It’s in the Cloud (Part 1 of 2)

Recently I was interviewed by FOW magazine about the growing adoption of cloud computing in finance and trading. As we are both a provider and consumer of cloud services, we have an interesting, credible perspective. 

Our next-generation trading platform, which we are simply calling TT, is delivered via software-as-a-service (SaaS) and underpinned in part by third-party cloud services. FOW’s questions were provocative and on point given the many conversations I and others at TT have held with our customers in preparation for launching our next-gen platform. I thought it was worth recapping the interview in a two-part post for our blog readers.

Part one is below. Look for part two here next week.

FOW: What demands are you seeing from clients that reflect the current trends/state of play in the market?

MM: Our customers continue to put downward pressure on trading technology costs while demanding expansion into new markets; these seem to be perpetual trends. Outsourcing of the trading infrastructure is now a more attractive option due to the lower cost of a shared solution and the reach of networks into global markets. Moreover, a larger pool of firms now sees outsourcing as an attractive option due to the ubiquity of low-latency performance, improved understanding of security in the cloud and increased reliability of cloud solutions.

There will still be those that keep solutions in house. One example is the ultra-low-latency firm executing arbitrage strategies that are fundamentally based on the speed of information and the ability to execute trades against that information ahead of everyone else. But in general, we expect the number of firms in-sourcing their execution platforms will continue to dwindle as the cost of maintaining a competitive speed advantage on in-house platforms continues to rise exponentially.

FOW: How are you responding to those demands with products and services?

MM: TT is in a good position to respond to current industry trends with our next-generation SaaS trading platform, which we are preparing to roll out to early-stage users next month. Users will self-provision their services and access the platform over the Internet through a web browser or mobile application.

The new platform is an extensive refactoring of our existing trading architecture. It’s built from the ground up utilizing best-of-breed commercial and open-source technologies, improving performance while lowering costs. Rearchitecting the platform gives us the opportunity to further improve in areas we are already doing well, including scalability, failover and extensibility.

As a SaaS solution, our next-generation platform is inherently more scalable and operationally efficient than our existing hosted solution. We believe it will be a highly competitive offering when price, performance and functionality are considered all-in. The lead time for adding new features and functionality, including expansion into new markets or assets classes, is significantly shortened with a SaaS distribution model.

FOW: How does cloud/SaaS provision reflect the needs of customers in the market at the moment?

MM: The SaaS model has been around for a while, so the benefits and costs are fairly well understood: low initial costs/reduced investment risk, reduced time to benefit, mobility and elastic pay-as-you-go/pay-as-you-grow pricing. It’s our opinion that the benefits of a SaaS platform are amplified for our customers and users, who previously paid high costs to access new markets via their internally hosted execution platforms. For example, building and maintaining a high-performance trading infrastructure requires a significant investment and a relatively long-term commitment; there are not only the initial build-out costs, but also ongoing operational expenses. When traders or firms can access new markets with a few clicks and zero build costs and still have very, very low execution latency, then you have a compelling product or service.

Additionally, the next generation of traders will want mobility, with the ability to trade on multiple platforms, desktops and mobile devices. Cloud and SaaS models provide this mobility by retaining user data and state within the provider’s realm, making it available from anywhere and on any device.

In our opinion, the demand for SaaS provisioning has always been there. But now—20+ years after the commercialization of the web browser and the subsequent proliferation of web services—our users actually expect it from their technology providers. This is due in part to the fact that users now regularly rely on SaaS solutions in their daily lives, both inside and outside of work, as well as the shifting dynamics in our industry and the growing acceptance of cloud technologies as secure and robust.

I’ll talk more about this in the second half of this blog post. Come back next week for that.

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For more information on the next-gen TT platform:

Posted by: Mike Mayhew, CIO

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