June 01, 2011

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When it comes to cloud computing, capital markets firms have adopted "private" clouds that run inside each bank's own data centers. But when it comes to the public cloud -- the cloud that everyone else in the world outside of financial services considers the wave of the future -- financial CIOs have run the other way, citing reliability, security and compliance concerns.

So when Amazon's EC2 cloud network crashed in April, CIOs across Wall Street said, "I told you so." And when Sony's PlayStation network was hacked, chief security officers gloated that they were right to distrust the entire cloud technology universe. Both of these very public incidents helped galvanize compliance officers who are worried that regulators will not tolerate banks having certain types of data in the cloud.

Still, technology and business executives across the industry have been looking for a public cloud offering that might be acceptable to regulators and also provides security and reliability. Yesterday, with NYSE Technologies' launch of its Capital Markets Community Platform, a financial services industry-specific cloud service developed in partnership with EMC and VMware, some of the compliance and security concerns may be addressed. NYSE Technologies is the commercial technology arm of NYSE Euronext.

It remains to be seen if the cloud offering from NYSE Technologies will provide the reliability and security that firms require. After all, NYSE's cloud community isn't slated for public launch until July 1 and, currently, only two financial firms are using the offering in "beta" -- Pico Quantitative Trading and Millennium Partners. It also remains to be seen if firms will leave their own private clouds for the Community Platform. But initial reactions to the offering have been positive.

Dan Raju, CIO at online broker TradeKing, has reviewed the architecture and the cloud platform during a number of meetings with NYSE Technologies in recent weeks. "There is going to be a lot of discussion about security and compliance, and that's natural when it comes to cloud," Raju says. "I looked at the NYSE architecture and it is secure. They have taken the regulatory and security concerns into account. The fact that you can provision it inside of NYSE's data center speaks a lot to the level of security."

NYSE Technologies is positioning the Capital Markets Community Platform as a market-neutral platform for the capital markets industry that will help improve the IT operating model of many Wall Street banks, says Stanley Young, CEO of NYSE Technologies. "Doing business the way it used to be done cannot exist going forward," Young says. "Clients are demanding greater service at a reduced cost base and the banks and brokers have to go to market differently." The Community Platform "lets the banks focus on services to the clients, while we focus on the infrastructure."

The infrastructure that Young's company is providing is considered by observers to be a step above the public cloud solutions, such as Amazon's EC2, because of what NYSE Euronext brings to the table: legitimate Street cred.

The New York Stock Exchange, or the Big Board, is considered by many to be the symbol of the U.S. capital markets and a business with which practically every broker already transacts daily. Brokers already run some of their most valued technologies -- trading systems and algorithms -- in the company's new Mahwah, N.J., and Basildon, England, data centers. The two state-of-the-art data centers will also house the cloud infrastructure, with 100,000 square feet available in the Mahwah facility and 70,000 square feet available in Basildon. NYSE Technologies is already looking at expanding the offering to other market centers, including Brazil and Japan.

NEXT: A Step Above Amazon?