Ever since the banking industry started to move applications and processes to the cloud, most pundits wondered when Amazon Web Services (AWS) would make a significant play in the financial services space. Today, might be the day, as AWS has partnered with Nasdaq OMX to offer FinQloud. The service allows financial industry participants to efficiently manage and store financial data in the cloud so the firms can streamline operations, reduce costs and meet regulatory compliance requirements without making costly capital expenditures for underlying infrastructure.
"It is really about cost savings for the industry," says Ted Myerson, global head of access services in Nasdaq OMX's transaction services unit. "The industry is at a breaking point for operational costs. There has been an increase in costs for handling data, there are increased costs around regulation and, on top of that, there has been an increase in the frequency of how often a firm has to report to regulators."
The platform combines AWS's cloud infrastructure with NASDAQ OMX's experience in providing technology and advisory services to exchanges, regulators and broker-dealers. FinQloud may be used by a variety of financial services firms managing data not only from NASDAQ OMX but also from any number of sources. FinQloud is tailored for financial services companies, according to Myerson, but any member of the financial community -- including other technology providers -- can use the service.
To date, many financial firms have stayed away from public cloud offerings because of security and compliance concerns, although Adam Selipsky told Wall Street & Technology in an interview that AWS is familiar with the needs of financial services companies. "AWS has done business for years with many leading financial services firms," he says. "We work with Bancinter and we have worked with Nasdaq for four or five years. The capabilities of AWS in infrastructure and scale, along with the expertise from Nasdaq in financial services, makes this a powerful offering." To address security concerns, all data in the industry-focused semi-private cloud is encrypted while it is in AWS, says Myerson. In addition, all encryption keys are located in Nasdaq OMX's data center in Carteret, NJ, which is run by Verizon Data Services.
As part of the initial launch, NASDAQ OMX plans to offer two solutions: Regulatory Records Retention (R3) and Self Service Reporting (SSR). R3 will provide broker-dealers with a storage and retrieval tool to help meet U.S. Securities and Exchange Commission Rule 17a-4 record retention obligations. SSR will enable broker-dealers to perform fast, on-demand analysis and reporting on their stored trade data. Both R3 and SSR will be hosted on FinQloud and tailored for members of the financial services industry. R3 is expected to be available in the coming months, according to Nasdaq OMX.To meet the stringent operational and regulatory security requirements of the financial services industry and to protect data integrity, all connections to FinQloud will be required to pass through an encryption key management system, scheduled to be available in the coming months as well. The encryption key management system will be housed in private NASDAQ OMX data centers before directly connecting to AWS. A client's use of FinQloud's patent pending R3 application will be subject to submission of required documentation to their applicable regulator.
"Working with AWS, the leader in cloud technology, demonstrates our commitment to provide innovative solutions to the financial services industry at large," says Eric Noll, Executive Vice President of Transaction Services U.S. and U.K. at Nasdaq OMX, in a press statement. "FinQloud, as a protected warehouse for regulated data, fosters efficient and reliable markets for investors. We will continue to work with AWS on cloud technology offerings that foster transparency and improve the quality of our markets."
FinQloud is the second financial services cloud launched by a major US exchange. NYSE Technologies, the commercial technology arm of NYSE Euronext, announced its financial services community cloud offering back in 2011, although NYSE's offering focuses more on Infrastructure as a Service (IaaS), according to Ken Barnes, Senior Vice President, Global Head of Platform Services, NYSE Technologies. "We have taken great care to control the service from end to end," Barnes said of NYSE Technologies cloud offering, in an interview with Wall Street & Technology.
Barnes reports that clients in the NYSE cloud are performing a variety of functions, including application testing and development, disaster recovery, backup and "a lot of growth around replicated storage and archival."