Increasing flexibility: Capital Markets firms in the cloud adapt more quickly
In his post titled “Dealing with disruption: How financial institutions are using cloud technology to respond to COVID-19 and reshape the industry,” Scott Mullins, Head of Worldwide Financial Services Business & Market Development for AWS, discussed how COVID-19 has impacted the normal course of business in the Financial Services industry. For Capital Markets firms, scaling their market infrastructure to securely process the exceptional volumes of data as well as assessing and reacting to market conditions during this pandemic have been essential for their customers.
When speaking to customers about how AWS can best support them during this unprecedented time, it was striking how dramatically their needs for both scale and operational flexibility changed practically overnight. With record-breaking trading volumes and tremendous market volatility, exchanges and trading firms required greater capacity and computing power for transaction processing, risk calculations, and portfolio optimization.
Firms recognize that their legacy applications and infrastructure are hard-pressed to ramp up at the scale and speed required. As they begin to think about a post-COVID world, there’s a realization that the way they have historically approached their business will need to change. As Accenture pointed out in its recent report about operational responses to COVID-19 for financial institutions, “Leaders must prepare for the short-term while also developing new capabilities and ways of working that will seamlessly enable longer-term changes to how they operate.1”
Scaling to support record-breaking volumes
COVID-19 has caused significant market volatility. Market-wide circuit breakers have kicked in, and system capacity issues have interrupted service. Additionally, there is a recognition that credit analysis must change with each government funding program or central bank move. Finally, firms that rely on data centers have been denied physical access to co-location facilities, and supply chain disruptions have made getting replacement parts or server deliveries challenging.
These factors have highlighted the need for operational agility and resilience, and AWS has enabled our customers to better navigate the ongoing storm. For instance, a global exchange was breaking trading volume records on consecutive days in February and required higher capacity for processing the spike in order entry and market data. Because they were using Amazon Elastic Compute Cloud (Amazon EC2) I3 Instances, it was easy for them to replace these instances with z1d instances, the fastest of any cloud instance, which led to an immediate 40% boost in processing. This exchange was also concerned with other capacity constraints of its network – some parts of which are not in the cloud – and used the new Replication Time Control feature of Amazon Simple Storage Service (Amazon S3) to replicate trading data in seconds. This ensured they had access to the data when they needed it most, significantly reducing stress levels for the infrastructure team.
Regulators, too, are contending with record volumes. One regulator was able to quickly and easily scale for a three-fold increase using Amazon S3 and Amazon EMR. Another was receiving trading record volumes so large from a member firm that its legacy FTP infrastructure crashed. By migrating the record transfer to an Amazon S3 direct transfer model, the regulator improved elasticity without additional costs.
AWS has consistently supported our customers through the pandemic. As CEO Andy Jassy recently pointed out, our “operational availability and performance is many times higher than the next biggest provider.” It’s equally important to emphasize that AWS gives customers the elasticity to scale back down once markets settle. Not only are they able to ramp up capacity and compute without the time and expense of purchasing new machines, the ability to scale back down frees them from the costs and resource-heavy maintenance of over-provisioned physical hardware that sits idle.
Powering mission-critical applications
Firms have invested deeply to equip their trading desks with fast access to data and next-gen analytics. But as these operations move outside the office, significant gaps have appeared between trading on the floor vs. at home. Personal computers and residential internet service typically cannot support the volume of data nor complex systems for order management and trade execution.
Institutions using cloud-hosted workspaces and data systems have been able to transition more smoothly without interrupted operations. In their recent post co-authored with AWS, Javier Jose Pecete, Cloud Security Architect at BBVA, and Javier Sanz Enjuto, Head of Platform Protection – Security Architecture at BBVA, discuss how Amazon AppStream 2.0 enabled more than 86,000 employees around the world to work remotely, ultimately reducing implementation time by 90% compared to on-premises projects.
This is just one example of how organizations around the world are rapidly adapting. The search for reliable, secure, and innovative methods to maintain communication, collaboration, and productivity is well underway. In addition to our own tools and services like Amazon AppStream 2.0 and Amazon WorkSpaces, firms can also quickly find, deploy, and manage solutions that help maintain employee productivity and connectivity from any location in AWS Marketplace, our curated catalog of SaaS business applications from independent software vendors.
Using Amazon S3 and Amazon API Gateway, exchanges like the CME Group offer historical data, while providers, including Bloomberg, Refinitiv, and Morningstar, offer real-time and streaming data. With the recent launch of its Cloud Data Service, Nasdaq now delivers a mix of real-time streaming data and historical datafeeds on AWS. This is just the latest example of how financial data providers and consumers are continuing to connect in AWS for a broad range of data, improved latency, and easier integration into applications and downstream systems.
Institutions can also connect to leading extranet providers via AWS Direct Connect for a private and cost-effective way to access data sets that are not availably natively on AWS. By establishing connectivity between AWS and their own datacenter, office, or colocation environment, institutions can reduce network costs, increase bandwidth throughput, and provide a more consistent network experience than Internet-based connections.
Since launching last year, AWS Data Exchange has helped simplify the way firms can securely exchange data in the cloud. Providers of market and alternative data such as Crux Informatics and Xignite can now reach new AWS customers, while analysts, researchers, and other data subscribers can easily find and subscribe to datasets — all with streamlined billing and delivery of data that increase visibility and optimize costs across the organization.
On the compliance front, AWS services help firms capture trading activity and conversations to create audit records and providing regulators with a consolidated view of markets. For instance, when FINRA selected AWS as its cloud provider for Consolidated Audit Trail (CAT), it was already relying on the breadth and depth of the AWS portfolio, including Amazon Aurora (for its primary database needs), Amazon Redshift (for data warehousing), Amazon S3, as well as AWS’s unparalleled security and compliance capabilities. And now, broker-dealers can quickly and securely simplify their network architecture using AWS PrivateLink for CAT reporting. AWS PrivateLink connects virtual private cloud (VPC) environments, AWS services, and on-premises applications without exposing data to the public internet.
New considerations for the future
The biggest question is how firms will handle the day to day while simultaneously planning for the future. The health crisis has forced organizations across industries around the world to evaluate their business continuity plans. In Financial Services, it has already re-shaped the way Capital Markets firms operate, and the only certainty is that they will continue to change.
1 An Operational Response to COVID-19 for Financial Services Institutions in North America, Accenture, March 2020.