Five ways multicast data in the cloud is transforming financial markets

Published by Arthur Rank, Wesley Elder & Pete Forsdick on July 3, 2023

The flow of data through the world’s financial markets is a critical force behind the global economy. Exchanges, trading firms, prime brokers, market data vendors and technology providers generate, communicate, manage and store vast amounts of data.

The volume, velocity and value of financial data is set to rise exponentially over the next few years.  For the highly regulated financial market, it’s not just a case of concerns about  ‘garbage in, garbage out’. The consequences of data breaches, errors and inaccuracies weigh heavy on industry minds. Real-time data helps remove the risk of human error through processing; it allows for deep analytics, to identify trends, patterns and forecasts; and it drives effective, faster decision making. The data itself just keeps on growing – and so does its value.  In 2022, global spend on financial market data is reported to have reached record levels at $37.3 billion according to one industry report. Real-time trading and data spending generated the largest share of revenue.

But as the financial industry accelerates cloud migration and organisations are moving more and more workflows to the cloud, there’s a disconnect which, until recently, has held the market back: getting market data feeds from their sources directly to multiple cloud environments has been a huge challenge, generally requiring conversion software to convert data from multicast to unicast. It’s complex, time-consuming and forces organisations to rewrite and retest applications. Now, digital technology has fixed this issue for the AWS cloud environment and progressive financial organisations are already seeing the benefits of raw multicast data sent directly to the cloud in its original format, without the need for conversion software. It’s transformative and it’s changing the industry in these ways:

It’s accelerating cloud migration and reducing risk

Capital markets have reached a critical juncture as they look to cloud migration to support new agile, responsive, data-driven business models; to find new revenue streams; and to enable an automated, digital-first customer experience, but few migrations are entirely seamless. Without extensive testing, organisations may not be aware exactly how applications will perform in a cloud environment. Newer technologies like multicast data in the cloud have already been tested by some of the best minds in the industry, so this takes the pressure off, reduces risk and eliminates costly mistakes. It also guarantees that applications integrate and work together.

It’s democratising data

Data and its analysis have had a profound impact on the world’s financial industry as we use data science, AI and machine learning to uncover deep analytics, identify red flags, detect fraudulent activity and carry out accurate risk analyses. Data in capital markets generates equally valuable insights for both buy-side and sell-side, and knowing how to analyse this data is key: one report named data analysis the key trading desk skill. But the ability to leverage data to transact, interact, analyse and inform decisions is a critical skill for many roles across the industry. Democratising data – making it accessible, easy to understand and workable for all – presents major advantages. As multicast data remains in its raw data format, teams can analyse and extract the information they need without spending hours reformatting it. This data and the insight it generates can be shared across organisations from anywhere they need, to make it comprehensive and relatable.

It brings the benefits of real-time

Real-time data in capital markets provides assurance and accuracy. Trading and prices are precise, lags are confined to the past and decision making is expedited. Organisations can deliver a more effective customer experience, with the latest information to hand; they can respond swiftly to the competitive environment, and can stay on top of regulatory change. Integrate this with scalability, flexibility and security delivered by cloud migration – as with multicast to the cloud – and real-time data becomes a powerful force driving the industry.

It fits with capital markets’ sustainability commitments

Reports estimate $125 trillion of climate investment will be needed to meet net zero by 2050, with estimates that 70% of this will come from the private sector, including the financial system, according to an article from HSBC.  Capital markets which fund these programmes will find themselves under scrutiny in terms of setting targets and taking action themselves to reduce emissions and create a positive environmental impact.

Previously, high consumption legacy hardware was needed to number-crunch capital markets data, but this has proven restrictive, expensive to run, and power-hungry. Multicast data in the cloud fits within a flexible delivery model which positively influences ESG commitments. One study suggests switching to cloud environments can reduce carbon released into the air by 88% and reduce power utilisation by up to 84%. Multicast market data distribution in the cloud supports sustainability commitments, aligning with targets to net zero and helping capital markets create more compelling use cases for cloud migration.

It readies capital markets for disruptive technologies

Multicast data in the cloud is delivered across high-performance digital infrastructure and a monitoring service that can trace the market data from its source, to the customer. This real-time monitoring offers best practice, provides transparency and offers peace-of-mind. Changes can be made swiftly and effectively. Essentially, the digital network that’s foundational to multicast is already transforming and futureproofing the industry, as a conduit to technologies such as AI, the metaverse and quantum.

Capital markets are experiencing digital transformation on a huge scale. This transformation is revolutionising one of the oldest industries in the world, as it becomes more agile, nimble and data-driven. Alongside this, the industry has become both responsive and responsible. Developing new technologies with the specific needs of global capital markets at their core – and integrating these with the vast capabilities of the cloud – will futureproof the industry for the exciting times ahead.

This article has also appeared in Financial IT.

 

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