AWS for Industries
How Aquis created a cloud-native exchange to meet the highest regulatory requirements on AWS
Aquis Stock Exchange
The Aquis Stock Exchange (AQSE), based in the United Kingdom, is a subsidiary of Aquis Exchange PLC, which operates the seventh-largest pan-European Equities exchange group by daily average volume. Focusing on growth companies, AQSE operates its own markets and sells technology solutions to other exchange operators. In 2023, AQSE became the world’s first regulated equity investment exchange to operate a market fully in the cloud, marking a significant milestone in financial technology innovation.
Why move a core market to AWS?
Aquis firmly believes that cloud infrastructure is the future for exchanges of all microstructures, asset classes, and sizes. The cloud’s scalability, flexibility, and continuous platform innovation enables exchanges to provision their market environments more efficiently, streamline processes, and innovate faster.
Regulated exchanges currently generate significant technological and environmental waste largely due to regulatory requirements. Most regulators impose a ‘minimum headroom’ requirement on market infrastructure and software. This includes compute, networking, and local storage as well as a number of trading connections on the software side. Exchanges typically provision resources above this minimum level to manage the risk of a new high watermark trading day, which could require rapid and substantial scaling to avoid breaching regulations. Scaling this environment can be challenging, particularly for network equipment, due to long procurement lead times.
At Aquis, while regulators require 2x headroom, the exchange provisions 8-10x, in both primary and disaster recovery (DR) environments. On an ordinary trading day, only a small fraction of this capacity is used for production operation.
With the cloud, exchanges can meet their resourcing needs more dynamically. AWS, for example, has more compute and network capacity than any exchange globally, available on demand. This enables exchanges to achieve the required headroom levels while using only what they need at any given time in a more economical and sustainable way.
Why start with the matching engine?
Aquis chose to start with the matching engine as it is not a component which clients connect to directly (given that they use FIX or binary trading gateways). This initial phase of the migration did not impact external partners, like members or market data vendors, as the gateways remained on-premises. More importantly, the matching engine is the most significant component of an exchange platform and subject to the most scrutiny. It’s the critical component that creates deterministic behavior and outcomes for exchanges and their participants, which is crucial to maintaining fair and orderly markets.
While it might have been easier to first move peripheral, non-latency sensitive components like reference data, starting with the matching engine was a clear first logical step for a fully cloud native exchange. Indeed, if Aquis could not run the matching engine in AWS, the entire principle of moving an exchange to the cloud would be impossible. Additionally Aquis felt it important to start with the matching engine to demonstrate Aquis’ belief that the cloud can indeed meet the highest standards of global exchanges and providers.
How we migrated our market to AWS
Once Aquis decided to move the matching engine to AWS, we focused on two key next steps:
1. Technical development: This includes planning, building testing, and go-live phases
2. Regulatory engagement: We worked early and closely with the Financial Conduct Authority (FCA) to ensure the exchange continued to meet its regulatory requirements.
From a technical perspective, we quickly chose AWS as our Cloud provider. AWS is the only cloud provider offering native multicast through its AWS Transit Gateway. Multicast is a crucial technology for almost all exchanges worldwide, feeding into one of the base requirements – namely that of providing fair and orderly markets by transmitting market data to all consumers evenly and without conferring trading advantage to one participant over the other. Additionally, Aquis was already familiar with AWS’s platform, as we had a number of solutions already running on AWS.
For this project, Aquis used a range of AWS services, including Amazon EC2, AWS Direct Connect, Amazon S3, AWS Transit Gateway, and various logging and security services. Initially, the team created internal test environments using existing on-premise resources and connected them through AWS Direct Connect to an Aquis test environment in AWS where the team experimented with different Amazon EC2 instance types and sizes and networking capabilities. This was partly for latency, resiliency, and jitter but also to ensure that Aquis’ own proprietary technology for guaranteeing message delivery between on-premise and cloud environments worked as expected.
The project faced technical challenges, predominantly volume testing, network setup and reliability, and latency. While we were moving the matching engine to the cloud, client connectivity was still maintained at data centers on-premises. This introduced larger latency characteristics than clients experience prior to the move. Using internal performance testing tools measuring latency and jitter distribution profiles, Aquis concluded that the difference between our on-premise deployments and a cloud matching engine was appropriate for AQSE. With further optimization, Aquis Stock Exchange ultimately achieved a latency profile suitable for the market and its operations.
Engaging with the FCA
Parallel to the technical engagement, Aquis worked closely with the FCA to ensure the regulatory compliance of hosting our market on AWS. As one of the first exchanges globally to migrate a fully-regulated exchange to the cloud, there was no “regulatory blueprint.” Aquis diligently prepared and consulted with the FCA for approximately a year.
The FCA’s key consideration was that the exchange had to maintain resilience and scalability to support the UK’s critical financial markets infrastructure. This meant that everything from technological capacity to service level agreements, and performance to consistency, had to be considered.
Drawing from our experience delivering cloud-native solutions for customers, Aquis was confident that the project was technically achievable. But “technically achievable” does not always equate to regulatory-grade. A large amount of documentary evidence was the first step to the Aquis/FCA collaboration. Aquis tested for several technical outcomes, primarily throughput and latency, demonstrating improvements to our existing operational resilience framework.
Aquis provided the FCA with information about:
- Risk assessments
- Operational resilience matrix
- Production and disaster recovery testing plans and results
- Key milestones and timetables
- Enhanced monitoring framework
- Network jitter
- Exit strategy
We also detailed how we could provide additional resilience for an already highly-resilient market, as well as how the migration would impact clients, Aquis’ service levels, and the market’s tolerances for latency, bandwidth, and compute. Additionally, there were discussions around business continuity and testing, including any potential impact on members and the broader market.
The Results
Since going live in November 2023, the benefits for both Aquis and the market more broadly have been clear. By scaling our environment on demand, Aquis has lowered hosting costs and minimized environmental waste without impacting market quality. The successful deployment of the AQSE’s matching engine into AWS provides a path to migrate additional components and even more markets to AWS. This project was not just one of the first of its kind, but it also serves as a blueprint for future cloud migration within the constraints of a recognized investment exchange license.
Aquis’ Vision for the Future
While running matching engines for highly-regulated equity and options exchanges fully in the cloud is in its early stages, Aquis has been helping its technology clients to take advantage of the cloud for several years. We strongly believe that the benefits of the cloud – from technological resilience, scalability, environmental, and economic perspectives – are too significant to ignore.
A future in the cloud is exciting. A cloud-based technological approach could enable markets of all sizes to join a global network of exchanges running securely on a common infrastructure platform. This standardized platform and potentially common connectivity could then attract greater member participation by lowering the burden of connectivity for members.
As we have seen from our own migration, hosting markets in AWS lowers the total cost of ownership for an exchange. The reduced cost of deploying markets in the cloud could also enable exchanges to reduce fees. This could drive greater membership, liquidity, and trading, which would create greater democratization and depth of global markets.
Aquis is excited for this future and looks forward to continuing to work with AWS to help build it.