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The Now, The Cloud and the Crowd: What is Shaking Wall Street to Its Core? Part 2

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Bobs Guide Cloud Wall StreetFinance is often the last sector of the economy to embrace new technologies, preferring to shield it from tech booms that may lead to ruin. This caution hasn’t served Wall Street well in the past decade, however, because the industry has lost touch with the changing demands of the next generation of consumers, savers and borrowers. Much of that disconnect can be attributed to the increasing emphasis on regulation, but regardless of the cause, Wall Street fell asleep at the wheel while young entrepreneurs figured out how to reinvent finance for the era of the Now, the Cloud and the Crowd.

The Now

Most of Wall Street services and processes were engineered back when people had time and patience. That is so 1999. The Millennials are a generation defined by instant gratification. (We can thank Steve Jobs and weak parenting for that). Click. Done. Wall Street as an industry is still emerging from the seventies. Understand for instance it still takes three full days for a trade to settle in the US. There is so much legacy infrastructure and processes, layers upon layers of interconnected systems technology and software, much more manual intervention that you would dare to imagine, encumbered by massive regulatory constraints. Wall Street cannot do anything quickly and this has created a huge impedance mismatch with a millennial generation that does not give a damn about mahogany-lined conference rooms and certainly doesn’t want to talk to anyone about their investments. If Millennials want to open an account, they want to do it now! If they want to trade, they want to trade now. Don’t ask them to sign and fax a piece of paper to open their account because you lost them at paper.

The need for the Now is hitting all facets of the industry: money transfers, banking, lending. But nowhere is it more disruptive than in the area of wealth management. Financial advice used to be about personal relationships. Many believed this would never change. But today Robo-Advisors are threatening the industry. Now that software has been eating the world for a few years, you can delegate advice to a machine. Companies like Wealthfront, FutureAdvisor, Betterment and SigFig have all built-in - to a degree or another - instant gratification around their services. And customers are gobbling it up. Personal Capital just released its app on the Apple Watch this week. Wealth Management is now unified with the one device that is the embodiment of the Now.

Sure, the fact that Millennials have yet to experience a market downturn suggests that they will come crying to their human advisors at the next correction. But I doubt it. I predict that the so-called “robo-advisor” platforms will manage 15% to 25% of retail investable assets within 5 years.

The Cloud

We have been beating the Cloud drum for years now. Amazon Web Services is now a $5B business growing 50% a year. But why is this more relevant than ever to Wall Street?

The industry should have figured out how to take advantage of the public Cloud to eliminate the billions and billions of dollars it needs to shave from its cost structure. Instead, everyone builds the same technology infrastructure, deploys the same software, operates the same data centers, and builds up the same layers upon layers of brick-and-mortar technology to operate an industry that is essentially virtual. Spare a few ATMs here and there and you realise that from banking, to lending, to wealth management, to capital markets, the financial services industry is essentially perfectly suited for the ether, ideally positioned for taking advantage of the mutualised technology infrastructure offered by the public cloud. But it has wanted none of it. Why? The usual demons of security and regulation.

But startups don’t have that problem, unburdened by regulation, fueled by organic kale, yoga lessons while-you-work, and free lunches, they have embraced the cloud. I deal with fintech startups every day and we have hundreds of them as clients. They all pretty much run on Amazon Web Services. The public cloud and Amazon Web Services in particular, is the operating system of the future. A global processing infrastructure on a stick. Wall Street is fooling itself if it thinks it can beat Amazon at this game. The dice have been thrown.

The next generation of financial service companies—those who will be giving Jamie Dimon a run for his money - are being built on APIs and the cloud (itself a big API). And they will benefit from a massively smaller cost structure than their legacy competitors - which in the end will seal their success. It’s not only financial services firms that are being re-invented on the cloud, it is all their network of retail and institutional service providers. When your arm dealers are switching to the next generation technology, it’s time to renew your arsenal.

Nowhere is this problem more visible that in the sector served by my company, Xignite. The market data industry is a $26B market where most of the money is spent on proprietary technology inherited from the 80’s and 90’s and where redundant infrastructure spending is pervasive. Every single financial institution spends billions of dollars on the same technology as its competitors but draws very little competitive or service advantage. The public cloud and its lower cost structure is a lifeline that Wall Street must grab now.

The Crowd

Finally the biggest premise underneath Wall Street is also being challenged; that is has to be run be a set of gigantic highly leveraged, highly centralised, too-big-to-fail, century-old institutions to even work. New technologies have simply shattered that assumption with the unbundling of the bank as obviously the first step. Who needs a large bank providing a set of mildly integrated, average-quality services across the board when a crowd of new technology companies are able to provide a set of best of breed services all running in concert on the same device? Or when companies like Yodlee are able to provide those startups with an integrated view of the customer’s asset via easy APIs no matter where those assets are held. There is not a single sliver of service or technology infrastructure provided or used by large financial institutions today that is not under attack by dozens of startups worldwide. Take for instance Tradier who can provide you with a complete set of brokerage APIs to build your business upon. Ten years ago, doing this would have taken month and cost millions whereas now, a brokerage business can be built overnight. Sure not all startups survive but many will and have already changed the industry forever.  

And this not only applies to consumer-facing services like money transfers or savings accounts, it also applies to some core internal supply chains of the capital industry where the power of the Crowd is successfully applied to create alternative sources to Wall Street traditional fare. Estimize for instance, is applying the wisdom of the crowd to the earnings estimates and being very successful doing so - challenging big vendors like Thomson Reuters on a turf that is literally the beating drum of the markets. Vetr is also drawing upon the Crowd to rank stocks in a fashion similar to the way Morningstar built its famous star rating for mutual funds. Example abound in more obvious categories such as crowdfunding with companies like Kickstarter, Crowdnetic, Funding Circle, LendingClub and dozens of others worldwide.

There used to be a distinction between Wall Street and Main Street and at times their interest have not aligned. One of the biggest strength of Capitalism is its ability to self-improve. Today, Main Street and Wall Street are merging and they are leveraging new technologies to give the next generation what they really want: everything, right now, and for less.

Source: Bob's Guide

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Read the article on A-Team Insight Blog

By Mike O’Hara, Special Correspondent

Cloud-delivered market data was once ‘over my dead body’ territory for institutional market data managers, who understandably fretted aloud about performance, security and licence compliance issues. But Covid-19 has forced those same data managers to confront the fact that many of their professional market data users are able to work from home (WFH), in turn driving financial firms to question whether the pandemic could be the catalyst for a rethink of their expensive-to-maintain market data infrastructures, with cloud part of the data delivery solution.

For many financial firms, today’s cloud delivery and hosting capabilities offer a viable solution for supporting trading and investment teams and their support staff, accelerating demand for cloud-based market data delivery infrastructures. The thinking is that cloud may help firms with their broader aim of reducing their on-premises technology and equipment footprint, a trend that was emerging even before the Coronavirus struck.

But embracing cloud delivery introduces new challenges for market data and trading technology professionals. While WFH will doubtless continue in some form, it’s far from clear that all market data delivery can be migrated to the cloud. Essential market data functions will remain on-premise. High-performance trading applications and low-latency market data connectivity, for example, will continue to rely on state-of-the-art colocation and proximity hosting data centres.

For many financial institutions, the challenge will be how to manage these several tiers of market data delivery and consumption. Going forward, practitioners will face a three-way hybrid of on-premises, cloud-based (private/public) and collocated market data services in order to support a range of users: from work-from-home traders and support staff to trading-room-based traders, analysts and quants, to collocated electronic applications like algorithms, smart order routers and FIX engines.

Indeed, A-Team will be discussing the infrastructure, connectivity and market data delivery challenges associated with cloud adoption in a webinar panel session on November 3. The webinar will offer a ‘reality check’ that discusses best practices for embracing cloud, colo and on-prem to support this new mix of user types, with emphasis on capacity, orchestration, licensing, entitlements and system / usage monitoring.

With firms’ appetite for exploring the potential of the cloud piqued, data managers are now looking at whether they can hope to take advantage of some of the more widely recognised benefits of the cloud – flexibility, agility, speed-to-market, scalability, elasticity, interoperability and so on – as they grapple with the future market data delivery landscape.

“Market data infrastructure, in terms of data vendor contracts, servers, and data centre space, typically represents a large, lumpy, cap ex expenditure”, says independent consultant Nick Morrison. “And so having the ability to transition that to something with costs that are more elastic, is highly attractive”.

Of course, every firm has its own unique requirements and nuances in this regard. Proprietary trading firms, asset managers, hedge funds, brokers and investment banks are all heavy consumers of market data. But the volume, breadth, depth and speed of the data they need in order to operate is highly diverse. Which means that there is no ‘one size fits all’ when it comes to sourcing and distribution mechanisms (including the cloud).

Market data and the cloud – what’s applicable?

As they consider their options for including cloud in their overall data delivery plans, data managers need to assess whether and how specific data types could be migrated to a hybrid environment: Level 1 (best bid/offer), level 2 (order book with aggregated depth at each price level) or level 3 (full order book)? Historic, end of day, delayed or real-time? Streaming or on-demand? This all has a bearing on the feasibility of cloud as a delivery mechanism.

Firms also need to consider their mix of public and private cloud, or what mix or hybrid cloud solution best fits their needs. What about virtualisation? Or internal use of cloud architecture, such as building a market data infrastructure around microservices and containers?

The marketplace already has identified at least one workable use-case: the use of historical, tick or time-series market data, usually to drive some form of analytics. A growing number of trading venues (such as ICE and CME) and service providers (Refinitiv, BMLL and others) now offer full level 3 tick data on a T+1 basis, delivered via the cloud. Plenty more providers can offer historic level 1 & 2 data.

This kind of capability can be used for critical use-cases, such as back-testing trading models for signal generation and alpha capture, performing transaction cost analysis (TCA), developing and testing smart order routers (SORs), or fine-tuning trading algos to better source liquidity. In all of these cases, cloud-hosted historical tick databases can reduce on-premises footprint and cost, while offering flexible access to vast computing resource on demand, and many are finding this compelling. “When churning through such vast quantities of data, having access to a cloud environment enables you to scale up horizontally to process that data”, says Elliot Banks, Chief Product Officer at BMLL.

Where things start to get more complicated, though, is with real-time market data, where two of the biggest hurdles from a cloud delivery perspective are speed and complexity.

Deterministic speed

From a trading standpoint, speed is always going to be a significant factor. Nobody, regardless of whether they’re an ultra-low latency high-frequency trading firm or a human trader dealing from a vendor or broker screen, wants to trade on stale prices. The tolerances may be different but the principle applies across the board.

It’s a safe bet that any firm currently receiving market data directly from a trading venue into a trading server (collocated at the venue’s data centre or hosted at a specialized proximity hosting centre operated by the likes of Interxion) relies on deterministic low latency, and is therefore unlikely to consider cloud as an alternative delivery mechanism.

Clearly, HFT firms with trading platforms that require microsecond-level data delivery won’t be replacing their direct exchange feeds and often hardware-accelerated infrastructure with the cloud, as the performance just isn’t there, for now at least. This, of course, could change if and when the trading venues themselves migrate to cloud platforms, creating a new kind of colocation environment, but that’s likely some way off. “But these guys only have a few applications that really need ultra-low latency data”, says Bill Fenick, VP Enterprise at Interxion. “Most of their applications, be they middle office, settlements or risk, they’re perfectly happy to take low-millisecond latency”.

And what about other market participants? Particularly those that currently make use of consolidated feeds from market data vendors, where speed is perhaps a secondary consideration? This is where cloud delivery may have some real potential. But it’s also where the issue of complexity rears its head.

Navigating the complexity

To deal with the myriad of sources, delivery frequencies, formats and vendor connections used to feed real-time market data into their trading, risk, pricing and analytics systems, many financial firms have built up a complex mesh of infrastructure that ensures the right data gets delivered to the right place at the right time. The integration layer required to handle these data inputs may be delivered as part of the data service or may stand alone as a discrete entity. In either case, it’s unrealistic to expect that all of this infrastructure can just be stripped out and replicated in a cloud environment.

To address this challenge, some service providers are starting to offer solutions where the source of the data is decoupled from the distribution mechanism, aiming for the holy grail where either, or both, can be cloud-based.

By building individual cloud-hosted microservices for sourcing market data, processing that data in a variety of ways, and delivering it into end-user applications, such solutions can help firms migrate their market data infrastructure incrementally from legacy to cloud-based platforms. Refinitiv is starting to shift much of its infrastructure onto AWS, and other specialist cloud-centric vendors such as Xignite and BCC Group also enable internal systems to be decoupled from data sources, thus facilitating a shift towards cloud-based infrastructure. “We believe the customer should be able to easily move from source to source and get as many sources as they want. The cloud enables this kind of flexibility”, says Bill Bierds, President & Chief Business Development Officer at BCC Group.

Firms have long wanted to become more vendor-agnostic by decoupling their data integration capability from the primary data source. One investment bank in London, for example, was able to decouple Refinitiv’s TREP platform from its Elektron data feed and switch to Bloomberg’s B-Pipe for its data, delivered via the TREP framework. From a market data perspective, this has given the bank more negotiating power and less vendor lock-in, opening up greater opportunities to utilise cloud-based market data sources in the future.

Permissioning and entitlements

Perhaps one of the toughest challenges that firms face around real-time market data on the cloud is that of entitlements and usage authorisation. Firms sourcing data from the two main data vendors, Refinitiv and Bloomberg, will generally be tied into their respective DACS and EMRS entitlements systems, often augmented by data inventory and contract management platforms like MDSL’s MDM or TRG Screen’s FITS and InfoMatch.

Entitlements can be a thorny subject when it comes to cloud-based distribution of market data. Firms are wary of falling foul of their licence agreements with their various data vendors, all of whom have different commercial considerations and penalties for non-compliance. This is why accurate tracking and reporting of market data access and usage is crucial.

The cloud can be a double-edged sword in this regard. One the one hand, transitioning from a dedicated infrastructure to the cloud might trigger extra licensing costs for what is effectively an additional data centre, so they may need to go through a period of paying twice for the same data. Indeed, firms may already be facing this situation as they entitle staff to operate from home while holding enterprise licences covering only their headquarters and regional offices.

On the other hand, cloud-based services such as those offered by Xignite and others can make it easier for firms to manage entitlements across multiple data vendors from a central source via a UI. “Our entitlements microservice is integrated with our real time microservice, to make sure that any distribution and any consumption of data is authenticated and entitled properly, so that only the right users have access to the data,” says Stephane Dubois, CEO of Xignite, whose microservices suite is supporting NICE Actimize’s cloud-based market data delivery infrastructure.

Where next?

With new products, services and technologies emerging all the time, firms can be optimistic about the growing opportunities that the cloud can offer for managing market data. One particularly interesting development worth watching is the rise of Low Code Application Platforms (LCAPs), such as that offered by Genesis, which provides a cloud-based microservices framework that can be used for rapidly developing and delivering applications around real-time market data. One example is on-demand margining. “A prime broker can link to all of its customers and know exactly what their risk positions are based on real-time market data, so within minutes, they can be sending out margin calls”, says Felipe Oliviera, Head of Sales and Marketing at Genesis.

Industry behemoths such as Refinitiv, SIX and FactSet are also embracing the cloud. Refinitiv has now launched delivery of market data via AWS, is making its tick history data available on Google Cloud and has also recently announced a partnership with Microsoft Azure. FactSet has launched a cloud-based ticker plant on Amazon EC2. And SIX is partnering with Xignite for real-time market data delivery via the cloud. Bloomberg is also partnering with AWS to make its B-Pipe data feed available through the cloud. And the main cloud vendors themselves – Amazon, Google and Microsoft – have established dedicated teams to develop these markets

In conclusion, it’s clear that there are a number of challenges that firms still face when transitioning any part of their market data infrastructure to the cloud. (To register for A-Team’s free webinar on the topic, click here.) And in many cases, particularly where ultra-low latency is required, cloud is not the answer. But equally, by migrating certain elements of their market data infrastructure to the cloud, cost savings can be achieved, efficiencies can be gained and firms can potentially do more with less.

10/21/2020

Xignite, Inc., a provider of market data distribution and management solutions for financial services and technology companies, today announced it won the Best Real-Time Market Data Initiative at the Inside Market Data & Inside Reference Data Awards.

A longtime leader in the market data cloud space, Xignite provides financial data through its innovative cloud APIs, which are developer-friendly, reliable and endlessly scalable. Xignite data is normalized and ready-to-use, eliminating common pain points with legacy providers, while maintaining global coverage and institutional quality.

This award recognized Xignite’s work with SoFi, a leading digital personal finance company. In 2019, SoFi launched SoFi Invest, a free consumer investing service, and enlisted Xignite to power the entire platform, from its robo-advisor capabilities, to financial newsfeed, to real-time market alerts and curated stock list. SoFi has identified a number of ways in which these key features are driving member engagement – for example, 10% of users who receive a market alert make a trade within an hour. For more details on this collaboration, download the case study HERE.

“We are honored to be recognized for Best Real-Time Market Data Initiative. Xignite was the first to bring market data to the cloud, and we have continued to innovate and point the way to the future of this unique subset of the industry,” said Stephane Dubois, CEO and Founder of Xignite. “The SoFi collaboration is a great example of how a firm can leverage our diverse range of APIs to build an all-encompassing platform and scale it rapidly. As we look to the future, we will continue to serve our clients through transformative offerings, including our suite of Xiginite Enterprise Microservices, which we announced in July.”

The Inside Market Data & Inside Reference Data Awards are held by WatersTechnology and recognize industry excellence within market data, reference data and enterprise data management. The award ceremony took place during the publication’s Innovation Exchange held virtually from September 9 to September 22.

This is the latest honor in what has been a fruitful year for Xignite on the awards circuit. In the spring, the firm was named an SIIA CODiE Awards finalist and included on the WealthTech 100 list.

About Xignite
Xignite has been disrupting the financial and market data industry from its Silicon Valley headquarters since 2006 when it introduced the first commercial REST API. Since then, Xignite has been continually refining its technology to help fintech and financial institutions get the most value from their data. Today, more than 700 clients access over 500 cloud-native APIs and leverage a suite of specialized microservices to build efficient and cost-effective enterprise data management solutions. Visit http://www.xignite.com or follow on Twitter @xignite

About the Inside Market Data and Inside Reference Data Awards
The annual Inside Market Data and Inside Reference Data Awards, now in their 17th year, play a key role in WatersTechnology’s awards program, and are the only awards that feature a mix of call-for-entry categories determined by a panel of judges and categories compiled by WatersTechnology’s journalists and voted on by the brand’s readership. This year’s awards featured 32 categories in total: 21 call-for-entry categories, 10 journalist-compiled categories, and a hall of fame (lifetime achievement) award.

09/23/2020

Over time, the market has come to embrace cloud in more and more aspects of trading technology. Processing large sets of data and calculation of computationally intense formulas (or both) are common uses of cloud. While the market may not be quite ready to move every part of the trading cycle to the cloud, market data is becoming more and more mainstream. 

Market Data + Cloud Solutions

In fact, somewhat ironically, market data is very fertile “ground” for cloud offerings. Not only are third-party cloud providers continuing to enhance their market data offerings (i.e., Bloomberg,[1] Refinitiv,[2] Xignite[3]), but exchanges are also offering access to data directly via their own cloud services or innovation partners (e.g., CBOE,[4] IEX,[5] Nasdaq[6]). In a post-COVID-19 world, cloud has only become more entrenched in the trading lifecycle across both buy-side and sell-side firms. Even looking back to views from 2019, the growing importance of cloud servicing market data needs is clear.

In fact, almost three-quarters of respondents in our 2019 Market Data Study[7] identified innovation in market data as highly important, with cloud seen as the second most impactful innovation (trailing only slightly behind artificial intelligence). 


Read entire blog post by Shane Swanson, Senior Analyst, Market Structure and Technology at Greenwich Associates.

09/22/2020

Xignite, Inc., a provider of market data distribution and management solutions for financial services and technology companies, announced today that it recently enhanced its Bond Master API. Xignite offers several APIs that provide real-time, delayed, historical fixed income pricing and reference data for corporate and agency debt bonds. The Bond Master API enhancement increases the coverage from the United States to 190+ countries, adds additional bond types to support more than 2 million active bond issues, and increases the ease of use of the API with several new endpoints.

Unlike legacy fixed-income data solutions, Xignite’s Bond Master API is cloud-native and offers a robust selection of use-case-based endpoints. Developers can easily integrate these endpoints into their product or app, regardless of type, amount, or frequency of data, without the need for any complex integration logic. Unlike file-based data delivery solutions, the Bond Master API makes on-demand integration into downstream security master or compliance systems frictionless.

Additional detail on the enhanced Bond Master endpoints:

  • The List endpoint for bond type, issuer type, and domicile enables clients to slice and dice the bond universe differently based on use-case.
  • The ScreenBonds endpoint enables clients to dynamically and easily screen the bond universe by combining criteria based on the coupon rate, maturity date, callability, and issue convertibility.
  • The ListBondDataPoints and GetBondDataPoints endpoints enable clients to more easily pick and choose the reference data points they need to integrate into their systems.
  • The GetBondDataPoints endpoint enables access to additional reference data points without requiring changes to an existing implementation.

“Because much of the benefits of a reference data service derives from its breadth, depth and quality of coverage, these enhancements give you the added peace of mind that comes from knowing your holdings are validated against a complete universe,” said Vijay Choudhary, Vice President, Product Management, Market Data Solutions at Xignite. “These enhancements eliminate the need to maintain an on-site bond security master, which ultimately saves our clients time and eliminates significant unnecessary expenses.”

Additional bond issuer types now include: Government Agency, Government Controlled Company, State Government, Supranational

Additional new bond types now include: Bankers Acceptance, Capital Securities, Cash Management Bill, Certificate, Certificate of Deposit, Commercial Paper, Covered Bond, Debenture, Depository Receipt, Discount Notes, Loan Note, Loan Stock, Medium Term Notes, Note, Permanent Interest Bearing Shares, Preferential Security, Preferred Security, Reference Bills, Structured Product, Strip Package, Treasury Bill

Additional reference data points are also now available for all bond types:

  • Issue instrument identifiers (CUSIP, ISIN, Symbol, etc.)
  • Bond Issuer details including issuer name, domicile, unique company identifier, issuer status, industry and sector
  • Bond Issue details including maturity, coupon, coupon type, par value, dated date, distribution and amortization details, day count convention, original issue details, liquidation right, callable, convertible, guarantor, redemption, and other issue details

This is just the latest example of Xignite’s ability to innovate. Earlier this year, the firm unveiled its suite of market data management microservices and also received a patent for its market alerts technology.

About Xignite

Xignite has been disrupting the financial and market data industry from its Silicon Valley headquarters since 2006 when it introduced the first commercial REST API. Since then, Xignite has been continually refining its technology to help fintech and financial institutions get the most value from their data. Today, more than 700 clients access over 500 cloud-native APIs and leverage a suite of specialized microservices to build efficient and cost-effective enterprise data management solutions. Visit http://www.xignite.com or follow on Twitter @xignite

09/16/2020