Top Eight Reasons for the Buy Side to Adopt The Cloud
TradingScreen introduced cloud-based trading more than a decade ago, before the term “cloud computing” even existed. Since then, we have seen a huge uptake in TradeSmart, our independent, multi-asset execution management system that is delivered through a Software-as-a-Service (SaaS) model, as well as our other platforms and products that utilize the cloud.
Yet, even as a host of consumer and enterprise applications move to the cloud, there are still some buy-side firms that don’t fully understand the advantages of implementing SaaS architecture.
For the benefit of these late adopters, I present the top eight reasons for the buy side to adopt the cloud:
- Reduced Cost of Ownership: The major advantage of SaaS that most people already understand is the cost savings. The amount of hardware and staff required to support even the most basic trading operation is quite significant. Using a SaaS-based system, companies can expect to save upwards of a million dollars per year.
- Better Security: Many clients resist SaaS because they feel their data is more secure residing on a physical machine within their facility. When a trader places an order, these transactions are transmitted outside the firm to third-party hardware at the exchange or other liquidity destinations. So the security benefits of having in-house systems are illusory – transaction data is still sent outside the firm and stored physically offsite. Additionally, SAS 70 provides guidance on the internal controls financial service providers must comply with; these controls apply both to SaaS providers as well as operators of proprietary data centers.
- Disaster Recovery: More likely than data theft is the potential for limited recovery because of hardware failure following a disaster. Firms with on-site deployment, especially ones that are concerned about having data go outside of the firm, are particularly vulnerable. It’s a fact that, at some point, ALL hardware will fail, catastrophically. Those with SaaS-based systems have the benefit of real-time failover, with multiple data centers around the world, to provide protection against the failure of a specific piece of hardware, or a more widespread event, such a city losing power due to a natural disaster.
- Speed of Change to Satisfy Adherence to Regulatory Obligations: The Dodd-Frank Act, and other regulatory regimes, have ushered in a new era in compliance, where major changes in reporting, clearing, and risk need to be implemented on very short timelines. Cloud-based solutions are really the ONLY ones that can adequately deal with these challenges. Updates of bespoke, deployed solutions are time-consuming and expensive and can tax the capabilities of most software firms.
- Confidence in Solutions with a Large Number of Users: New functionality is always being developed for complex trading solutions, either through innovation, client requests, or in response to regulatory developments. Therefore, it’s important for trading solutions to be able to adapt quickly to bugs or new users’ demands. Cloud-based solutions are rolled out to all users at once. As a result, any issues that require an update are flagged quickly by the user base. This “hive mind” approach to updates and bug fixes ensures that the system improves continuously and rapidly. Combined with the fact that all changes occur for all users in real-time, cloud-based platforms provide a high degree of confidence that there is continuous quality improvement built into the system.
- Speed of Onboarding and Implementation: Because there is no onsite software to install,implementations can take hours rather than months, as is the case with many deployed solutions.
- SDK to Build Custom Client Software: One of the key misconceptions about cloud-based solutions is that they cannot be customized and are, in effect, a “one- size-fits-none,” product. To be sure, TradingScreen provides a software development kit (SDK) to clients that allow them to customize the service to meet their specific needs, without the disadvantages associated with a deployed software solution.
- Latency Sensitive Clients Benefit from Our Global Cloud: The backbone for TradingScreen’s cloud-based solutions is a worldwide network of data centers. Although the network is global, the data centers are local to most clients who trade on major markets. Because our data centers are located in close physical proximity to the markets they serve, clients are able to gain a trading edge through significant latency reduction.
It makes intuitive sense that buy-side traders should not manufacture their own clothing, or deliver important packages themselves, because they are not in those lines of business. However, firms that use deployed solutions are heavily invested in a business that isn’t their core competency – information technology support.
Cloud-based applications are the future of all financial services. Buy-side firms that have resisted this change now have a huge opportunity to lower costs, improve service, and generally make their lives easier, as new regulation and market changes bring constant challenges.
If you would like to learn more about best practices for cloud-based solutions for the buy side, check out our recent article in SaaS In The Enterprise.com, Finance: Trading UP from IT to SaaS written by William Terdoslavich.