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September 25, 2012 5:01 am
Nasdaq OMX is offering Wall Street brokers a chance to store key regulatory data on Amazon’s “cloud” computers, marking the ecommerce conglomerate’s boldest incursion into the financial services sector.
The move taps into the desire of banks and brokers to cut costs in the face of thinner trading volumes and new regulations. Some have settled on outsourcing expensive back-office technology infrastructure as one solution.
Amazon has already revolutionised businesses ranging from bookselling to warehousing with its combination of low prices and high technology.
Nasdaq OMX’s service will enable brokers to store information such as trading records or customer emails on Amazon’s servers. Regulators require companies to hold such information for a period of seven years and many companies do so on costly internal systems.
“Storing and retrieving data can be done quickly, easily and inexpensively,” said Andy Jassy, a senior vice president at Amazon Web Services. “With the scalability, cost-effectiveness and flexibility of the cloud, customers can quickly conduct analysis and reporting regardless of the amount of data.”
Thousands of companies already run parts of their business using Amazon’s cloud service, which has grown rapidly in its six-year history.
Asked if real-time stock trading could eventually take place on Amazon’s cloud, Mr Jassy said: “It is a possibility.”
Some observers, however, warned that Wall Street may be hesitant to embrace external data storage services due to potential risks.
“Reliability, security, accessibility and performance are the key drivers for capital markets and the most well-known cloud services are not known for being able to deliver their level of expectations,” Mark Palmer, chief executive of Streambase, a US trading software group.
Nasdaq said records compiled by FinQloud will be kept at an Amazon data centre in Virginia, but would pass through its own data centre to receive additional security encryption. Amazon data centres suffered three outages in the past 18 months.
The partnership with Amazon comes as Nasdaq has sought to offset a decline in its trading revenues by selling more data services.
Eric Noll, executive vice president at Nasdaq, said brokerage companies could save up to 80 per cent from their storage costs by switching to FinQloud, which will initially be available only to US traders but may be adopted for other markets.
Rick Lane, chief technology officer for Trading Technologies, a US financial software business, said: “The industry is trending in this direction. Firms are realising that building their own big-data solutions within a cloud is expensive to create, difficult to maintain and costly to access.”
The financial industry is preparing for increased oversight by regulators and Nasdaq said FinQloud may help brokers to manage the demand.
Earlier this year, the Securities and Exchange Commission approved a plan to require exchanges to establish a tracking database for single orders, a large-scale surveillance system proposed in the aftermath of the 2010 “flash crash”.
Additional reporting by Tracy Alloway in New York.
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