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What’s Driving Capital Markets’ Growing Interest in Cloud?

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By Mike Powell, CEO, Rapid Addition.

As we pointed out in our last blog, after an extended period of reticence – based mainly on sensitivities around latency, security, and privacy – capital markets trading firms are finally joining the rest of the digital world by exploring how cloud can help their business and streamline or strengthen their operations.

So, what’s changed?

According to an A-Team survey of 20 capital markets organisations commissioned by Rapid Addition, interest in cloud is being driven by a number of factors.

Chief among them is the promise of greater agility and flexibility, specifically access to large-scale compute-on-demand offered by cloud technologies. (I’ll be discussing some of the key findings of the survey at A-Team’s TradingTech Insight Briefing in New York on June 8; you can register to attend here.

As they struggle to handle the massive volumes of data now available to them, firms are realising that internal legacy platforms are no longer capable of delivering the rapid time to market they require to respond to emerging business opportunities in a fast-moving world.

At the same time, with margins shrinking and an increasingly competitive environment, many firms are looking to shift their cost base from a capex model to recurring opex, avoiding large early-stage capital expenditure and mapping costs more closely to revenue streams. Migrating certain functions and processes to cloud can facilitate that shift in certain cases. This is in addition to the cost benefits that several respondents experienced by reducing reliance on their own data centres and on-prem infrastructure.

In terms of operational benefits, survey respondents cited the ability to conduct low-cost, risk-free scenario-testing, along with the ability to rapidly design, build and test IT solutions without impacting production systems. Interestingly, when discussing the question of IT security, a topic often raised as a barrier to using public cloud, several suggested they viewed cloud operators’ approach to security as superior to that of their own organisations.

None of these drivers is particularly new, so what is pushing capital markets firms to consider adopting cloud now, as opposed to over the last 10 years?

In short, the competitive pressures outlined above, as well as the modern philosophical stance toward reducing overall operational and IT footprint, combined with the promise of agility in the face of a rapidly changing landscape, make cloud a key tool in a firm’s digital transformation journey. And while initially focused on data and analytics, cloud is undoubtedly spreading across the broader electronic trading workflow.

Prior to publishing the full report, we’ll be exploring how trading firms are approaching cloud, which functions are best suited to cloud, and potential obstacles to success in future blogs, so stay tuned.

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