Sign up to myFT Daily Digest to be the first to know about Clearing and settlement news.
Trading Technologies is a software vendor that was founded in 1994 and whose clients include banks, hedge funds, proprietary traders and brokers.
Neil Munshi You have been among the industry’s chief advocates for the cloud — how has the industry responded? What have been the obstacles to adoption?
Rick Lane We’ve been saying for years that new technology is the way forward for the industry.
We initially made that statement more reservedly because our customers are some of the most conservative people on the planet. There were a lot of concerns — both justified and irrational — about that type of technology. But those concerns were unfounded in hindsight. Today just about every major bank who is a customer of TT’s is leveraging the cloud in some capacity. The reason they’re doing that, and why this transition happened relatively quickly, is that they wanted do it themselves and physically own the infrastructure and the network in order to be safer.
What banks and financial institutions have seen in the intervening years is that their data is their biggest asset. You have to be constantly innovating in the cyber arena in order to make sure your data is safe. Banks simply aren’t equipped to do that, and the giants of the world — the Amazons and Googles — are.
NM Where does cloud adoption in the trading industry go from here?
RL Banks are starting to realise that security and safety can simply be done better. If you’re global bank XYZ and you have ageing servers and networks and you’re worried about data breaches, moving those servers from data centres to the public cloud [which is hosted by external providers] solves a lot of problems.
Plenty of banks, if not all, are today reaping the benefits of moving infrastructure on to public cloud severs. In the coming years banks will dramatically improve the way they deal with the increasing amounts of data. That means adopting cloud platforms.
By that, I mean fully managed platforms. The Amazons and Googles of the world have platforms that allow you to dramatically improve the way you can store and retrieve data, and also get a network effect that makes it much easier to deal with your clients and your partners.
NM You have emphasised the importance of big data, and how much of it is untouched. How can it be used to gain an edge?
RL Consider audit data. If you’re a trader or FCM [futures commission merchant] or broker, every transaction that anyone in your firm places — such as an order or getting an order rejected or deleting an order — that all has to be logged for at least seven years. Fifteen years ago that wasn’t a big burden because it was humans clicking a mouse, and volume was in terms of megabytes a day.
That has changed to terabytes. Storing audit data is becoming increasingly burdensome. But that is incredibly rich data, not only for the bank but for those looking to trade smarter, especially if they have done millions of trades and have that data at their fingertips.
I now have this massive amount of data that represents all of our trading activity, and I can overlay that with market data, so I can see what the market was doing when I made those trades. Doing that type of thing with traditional IT management would be difficult, if not impossible. Now it’s a matter of clicking a few boxes on an Amazon cloud platform and clicking go.
NM Finally, I wanted to get your view on blockchain, which some people are hailing as potentially revolutionary.
RL I’m a little sceptical. Do I believe blockchain will play a significant role in our industry in the next five to 10 years? Probably. I don’t think it’s going to be the disruptive force a lot of people think and hope it is going to be. I base that purely on the fact that it hasn’t disrupted already. If you have to try this hard for something to disrupt an incumbent technology or industry, chances are it’s not inherently disruptive.
It presents us with an interesting solution to the notion of centralised clearing, but that’s solely an academic look at this. It’s certainly on TT’s radar. Our mission is to provide access to the world’s liquidity pools where trading happens.
To that extent, if anything, we would connect to a bitcoin exchange in the same way we connect to the world’s derivative exchanges.
Get alerts on Clearing and settlement when a new story is published