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Fast-tracking cloud in capital markets

Banks are increasing their use of cloud to leverage big data and create analytics-based decisions.

Tuck, Hodge, Lam, Mitchem

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The COVID-19 pandemic has accelerated how financial institutions shift computing and data storage to cloud. The immediate need is to support remote working and collaborative tools, but this is accelerating more profound uses of public cloud that will enable machine learning and big-data analytics.

When it comes to reinventing the office to deal with COVID-19, the good news is that there’s a lot of tech solutions that can help people work at home, such as online collaboration tools. That’s according to a panel of industry experts brought together by DigFin, ASIFMA and Refinitiv; to listen to the full discussion, click here.

The challenge is in expectations. People working from home now expect enterprise systems to offer the same seamless functionality of their consumer technology. Banks still have to protect their customer data and ensure their traders and relationship managers are behaving properly.

One way to resolve this tension is to move more functions such as online meeting rooms to public cloud. “We’re experiencing a conflation of consumer-grade technology, with its ease of use, and enterprise-grade tech that comes with obligations,” says Anthony Hodge, head of cloud governance at Standard Chartered Bank.

Infrastructure versus SaaS

Cloud technology comes in different facets. Banks use it for infrastructure to store, access and compute data, and as a platform to access software services.  COVID-19 is catalyzing adoption but exactly what banks do with cloud still depends on local regulations, on how a bank’s legacy I.T. infrastructure is built, and what firms want to achieve: a consumer bank, for example, may need to replace high-street branches, while a capital-markets desk needs to manage spikes in volumes and derive better market insights.

Banks still remain cautious about shifting their infrastructure from on-premise servers and data centers to public cloud. The requirements thrown up by COVID-19 will hasten some aspects of this migration.

“We’re seeing a behavioral change as people shift away from working in the corporate office environment,” says Regan Tuck, lead engineer at Refinitiv Labs.

Banks have been slower to embrace the infrastructure side of cloud because they do not want to risk exposing sensitive customer data. A new generation of digital-only banks and cryptocurrency exchanges are building tech stacks that are cloud-native, however, which in turn is helping regulators become more comfortable with cloud infrastructure.

Winning regulators

Jessica Lam, head of strategy at WeLab, a Hong Kong fintech that is now going live with a licensed virtual bank, says at first the received wisdom was to build an I.T. stack based on proprietary servers. The firm put a lot of effort into working with the Hong Kong Monetary Authority to win its trust. “We’re now deploying a multi-cloud infrastructure and tech stack,” she says.

Other aspects of cloud are a priority for how financial institutions are engaging with regulators.

“Regulators expect due diligence and meaningful risk assessments,” says Devan Mitchem, cloud engineer at Google Cloud. Cloud vendors such as Google provide institutions with the transparency around data protection, ownership and policies to make their case to regulators.

Solutions to local regulations regarding data localization is also a focus of industry bodies such as the Asian Securities Industry and Financial Markets Association. Its head of technology and operations, Laurence Van Der Loo, says, “It’s important to understand what regulators want to achieve.”

Data and beyond

Once companies shift more infrastructure to cloud, and experience benefits such as falling capex, they begin to use it for new projects, writing new code, and sharing data and content with clients with ease. “Refinitiv’s ticker history measures in petabytes,” Tuck says. “By putting it in the cloud we can share this data in ways that were not possible before.”

Google’s Mitchem says, “We’re seeing an explosion of capital-markets data moving to cloud. The end goal of financial firms is to drive margins while remaining compliant, and they’re using cloud to pursue business transformation. They can start small with a proof-of-concept and build on that.”

Not all aspects of capital markets will go cloud. For example, trading strategies relying on ultra-low latency are still better off processed by exchanges’ on-prem servers. But trading desks are already moving functions to the cloud, such as testing algorithms, training machines, and bulk analytics.

“The cloud lets you scale up massively and switch it all off when you’re finished,” says Tuck at Refinitiv. “Cloud is not just to access data sets, but to use them and derive insights faster.”

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Fast-tracking cloud in capital markets