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Blog · 06 Mar 2020

Cloud cuckoo land? Time for post-trade services to start taking the cloud seriously

The uptake of cloud solutions in the post-trade enviornment has been slow, but is likely to change.

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Business development for post trade

Around three years ago, most sectors were already quite advanced in their adoption of cloud technology.

In fact, many businesses had already embraced cloud solutions to the extent that it was moving from being considered ‘mainstream’ to being widely regarded as a ‘must-have’. The one notable area where this wasn’t the case was in financial services.

Why financial services have been reluctant to adopt the cloud

One clear reason was the systemic importance of many vital functions and types of institution. This is a particular consideration for any firm, buy side, bank, exchange or clearing house active in the post-trade environment. Not only was this area a key focus for many of the post-financial crisis reforms after 2008, but post-trade continues to be one of the most highly regulated areas, with new rules and compliance requirements being regularly introduced.

As a result, even just a few years ago most clients in the post-trade space would have disregarded the possibility of introducing cloud solutions into such a highly regulated operational structure. Not only that, but the entire post-trade environment is now highly complex. Providers are recognising the potential for cloud to be an enabler, but are also aware that it’s not going to be the silver bullet to fix everything.

The regulatory irony

Perhaps the greatest irony in post-trade lies in the additional regulatory caution needed in a post-crisis world, when such mandates are responsible for many of the extra challenges currently facing this sector. We’re noticing a marked shift in interest from clients who are now keen to explore a greater range of innovative cloud services as a realistic solution to many of their operational dilemmas.

Post-trade transformation: data

This is now the name of the game. It should then come as no surprise that clients are more interested in exploring the possibilities offered by new technologies, including credible cloud-based solutions.

Credible must still be the operative word, however, and not all cloud service providers understand the risk profile and complexities created by post-trade. Where cloud comes into its own is when it provides a catalyst for change. For example, one of the key pressure points for the industry is the volume of data which needs to be handled, processed, reported and understood. Yet as well as creating one of the main challenges, it also represents a valuable opportunity for firms who can store and analyse this data to gain greater value from it, either in terms of where costs can be saved or in the creation of profitable new lines of business.

Cloud solutions make it possible to handle this data far faster than ever before, with third-party providers able to work with banks and CCPS on creating new services or tools which can be plugged into the cloud without creating downtime or disruption.

Post-trade transformation: operations

A further example is the continued reliance on spreadsheets in post-trade operations. We’re all too aware of the potential this creates for man-made errors to creep in, while the need for them to be manually updated also has a significant impact on overall costs and productivity.

That’s why cloud-based tools and apps are becoming increasingly popular and are now seeing uptake even among capital markets firms. Key to their success is that they can be easily integrated with existing architecture, such as databases or messaging apps, yet significantly reduce operational burdens. Even so, these cloud solutions only tend to find success in the financial sector when they can provide the levels of data security which regulators now demand.

Firms can best ensure this by choosing to work with a partner who has a proven track record of working in both the post-trade space and in providing access to public clouds.

We work closely with our customers to develop cloud-based and hybrid post-trade services and solutions which they can trust. We have an unrivalled track record of working closely with all major clearing and custodial service providers, as well as newer entrants to the market. One recent example of this was the decision of leading cryptocurrency exchange and custodian, Gemini Trust, to join our Radianz cloud. In choosing to partner with us, Gemini can now access one of the world’s largest, secure networked financial cloud communities, while in turn our global community is able to access Gemini’s highly rated range of cryptocurrency services.

Cloud nine or cloud cuckoo land?

The shift to cloud services may not have been as dramatic as seen in other industries, but the vital nature of post-trade services dictates that change must be made in a far more secure and measured fashion. Even so, the transformation and efficiency potential offered by using the cloud can’t be ignored. The key to success will lie in using innovations, from a trusted provider, which have not only been proven to provide fast and secure services in the cloud, but also integrate seamlessly with existing operational workflows. Only then can the post-trade sector make sure that cloud technologies will be more of a game-changing ‘cloud nine’ than an unwelcome visit to cloud cuckoo land.

Around three years ago, most sectors were already quite advanced in their adoption of cloud technology.

In fact, many businesses had already embraced cloud solutions to the extent that it was moving from being considered ‘mainstream’ to being widely regarded as a ‘must-have’. The one notable area where this wasn’t the case was in financial services.

Why financial services have been reluctant to adopt the cloud

One clear reason was the systemic importance of many vital functions and types of institution. This is a particular consideration for any firm, buy side, bank, exchange or clearing house active in the post-trade environment. Not only was this area a key focus for many of the post-financial crisis reforms after 2008, but post-trade continues to be one of the most highly regulated areas, with new rules and compliance requirements being regularly introduced.

As a result, even just a few years ago most clients in the post-trade space would have disregarded the possibility of introducing cloud solutions into such a highly regulated operational structure. Not only that, but the entire post-trade environment is now highly complex. Providers are recognising the potential for cloud to be an enabler, but are also aware that it’s not going to be the silver bullet to fix everything.

The regulatory irony

Perhaps the greatest irony in post-trade lies in the additional regulatory caution needed in a post-crisis world, when such mandates are responsible for many of the extra challenges currently facing this sector. We’re noticing a marked shift in interest from clients who are now keen to explore a greater range of innovative cloud services as a realistic solution to many of their operational dilemmas.

Post-trade transformation: data

This is now the name of the game. It should then come as no surprise that clients are more interested in exploring the possibilities offered by new technologies, including credible cloud-based solutions.

Credible must still be the operative word, however, and not all cloud service providers understand the risk profile and complexities created by post-trade. Where cloud comes into its own is when it provides a catalyst for change. For example, one of the key pressure points for the industry is the volume of data which needs to be handled, processed, reported and understood. Yet as well as creating one of the main challenges, it also represents a valuable opportunity for firms who can store and analyse this data to gain greater value from it, either in terms of where costs can be saved or in the creation of profitable new lines of business.

Cloud solutions make it possible to handle this data far faster than ever before, with third-party providers able to work with banks and CCPS on creating new services or tools which can be plugged into the cloud without creating downtime or disruption.

Post-trade transformation: operations

A further example is the continued reliance on spreadsheets in post-trade operations. We’re all too aware of the potential this creates for man-made errors to creep in, while the need for them to be manually updated also has a significant impact on overall costs and productivity.

That’s why cloud-based tools and apps are becoming increasingly popular and are now seeing uptake even among capital markets firms. Key to their success is that they can be easily integrated with existing architecture, such as databases or messaging apps, yet significantly reduce operational burdens. Even so, these cloud solutions only tend to find success in the financial sector when they can provide the levels of data security which regulators now demand.

Firms can best ensure this by choosing to work with a partner who has a proven track record of working in both the post-trade space and in providing access to public clouds.

We work closely with our customers to develop cloud-based and hybrid post-trade services and solutions which they can trust. We have an unrivalled track record of working closely with all major clearing and custodial service providers, as well as newer entrants to the market. One recent example of this was the decision of leading cryptocurrency exchange and custodian, Gemini Trust, to join our Radianz cloud. In choosing to partner with us, Gemini can now access one of the world’s largest, secure networked financial cloud communities, while in turn our global community is able to access Gemini’s highly rated range of cryptocurrency services.

Cloud nine or cloud cuckoo land?

The shift to cloud services may not have been as dramatic as seen in other industries, but the vital nature of post-trade services dictates that change must be made in a far more secure and measured fashion. Even so, the transformation and efficiency potential offered by using the cloud can’t be ignored. The key to success will lie in using innovations, from a trusted provider, which have not only been proven to provide fast and secure services in the cloud, but also integrate seamlessly with existing operational workflows. Only then can the post-trade sector make sure that cloud technologies will be more of a game-changing ‘cloud nine’ than an unwelcome visit to cloud cuckoo land.

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