Stock Exchanges are data and software businesses. Nasdaq specifically, has had a significant software infrastructure business that provides technology solutions to over 100 organizations, like exchanges, clearinghouses, Central securities depositories, and regulators in over 50 countries.
This past week Nasdaq announced that they have partnered with AWS to offer real-time market data via the Cloud. So, why is this important in the 3rd decade of the 21st century? Wasn’t Nasdaq and other exchanges delivering market data via the cloud already?
My research released that Cloud adoption for primary market data from the source, is decent But like often is the case, the devil is in the details.
First, it seems that cloud adoption of market data directly from the source is about 2-3yrs old. Fintech Xignite always comes to my mind when I think of the early disruption in this market as a classic example of a Thomson Reuters disruptor (now Refinitiv).
Xignite – a wind intensifying the Fintech fireworks was one of my blog posts during my first quarter writing on Daily Fintech in May 2015! I am getting close to 270 blog posts as we speak.
APIs and the Cloud are the couple that `Open` up business possibilities that were not viable before. Be it in banking or in asset management and capital markets.
Only in late 2018, did Refinitiv start offering historical tick data to its clients via the Cloud in partnership with Google. They had to spend resources to convince their customers to stop deploying trucks full of tapes with the valuable historical tick data and storage rooms to process the data on the tapes. Their selling points included cost savings and efficiency gains in the Search for Alpha. See details here
Image from Refinitiv, October 2018
Nasdaq has been offering historical market data of all sorts much earlier always in collaboration with AWS. Their collaborations started in 2008 with certain data-on-demand offerings! Since then, they have also collaborated with Xignite for certain on-demand data sets (as early as 2011 see here).
Their recent cloud offering, the Nasdaq Cloud Data Service (NCDS), is bringing real-time data (not delayed or historical) via the cloud. It starts with real-time data for Nasdaq TotalView, Nasdaq Basic, Nasdaq Last Sale, Nasdaq Global Index Data Service (GIDS) and Nasdaq Fund Network.
One would think that real-time data via the cloud would only benefit HFT trading businesses that profit from latencies in market data. But that is not actually the case. There are several benefits to access real-time data via cloud beyond the obvious cost optimization (reduction in costs and paying for what you consume). These include real-time risk management and search for alpha, as there is not `hoping on and off` the cloud between all the departments that collaborate to monitor portfolios and the markets. Traders, middle office, and back office, can attain real-time sync with real-time access via the cloud and into the variety of applications each one of them uses.
To make this simple and clear: A trader usually has access to real-time market data (if not via the cloud, then he-she is overpaying because no one uses all the data since a trader will be focused in one area or instrument). The middle, back office and risk management do not have access to real-time data and therefore, they run their dozens of applications out of sync.
This market is clearly behind.
A recent report by Xignite and Greenwich Associates quantifies the market appetite for market data feeds via the cloud.
The survey shows that the market for accessing market data via cloud is ripe. However, the misconception that real-time data is not so suitable for the Cloud and for those trading (but not HFT) has not been overcome. The way I see this evolving is through realizing the benefits of Stream processing. Technologies that allow us to compute directly on data, are here and their adoption will unlock more benefits and value.
The CME Group, the global leader in derivatives market, became the first derivatives marketplace to offer real-time futures and options market data on Google Cloud Platform just this past November. Stay tuned.
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