Terry RochePrincipal, Head of FinTech Research

Stairway to the Market Data Cloud

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Capital Markets Current State

The existing cost model of Capital Markets is Unsustainable

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Return On Equity

3source: KPMG

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Capital Markets

Holistic view is needed to unlock value and comply with regulation

Cost of regulatory compliance driving all budgets Data constantly shifting and growing exponentially year

after year Costs must be reduced New models to achieve differentiation must be embraced

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Capital Markets Sell Side Spending

2016 2017-4.000%

-3.000%

-2.000%

-1.000%

0.000%

1.000%

2.000%

3.000%

4.000%

Sell Side Budget Trends

Sell Side Tier I Tier 2

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Financial Services Market Data - IT History

Financial Services was the first compute intensive online industry

Market data services: Created prior to PCs or the Internet There was no central organizing platform such as

Facebook IT services developed in Silos Different standards, interfaces, proprietary services and

organizations Limited change over the years

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Market Data Delivery

Market data services delivery has not fundamentally changed in a generation

On premise data feed aggregation On premise data distribution platforms On premise infrastructure sourcing and support On premise location of applications On premise databases

USD26bn annual spend for data dominated by two service providers

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Market Data Distribution

Market data distribution technology had been a differentiating factor within a firm’s operations

Maturity of the technology has driven this space to become more of a commoditized overhead

Vendor lock in remains an issue Specialized and often proprietary technical knowledge is

required Expensive to run and maintain Open source initiatives yet to see widespread adoption

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Step Change Transformation

A step change transformation is needed to drive the industry forward

Adoption of Cloud Third Generation Platform delivered Services Utilities Machine Intelligence Blockchain

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Third Generation Platform

Next Generation Platform Services Delivery

Cloud Based Combination: Mobile Social Real Time Data Big Data / Big Data Analytics Microservices

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Adoption of Cloud

Decision makers and influencers buy into the benefits of cloud Capital Markets technology not yet fully ready for cloud Barriers more than technology Lowering the cost of Operations Empowering Innovation

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“The financial world is one step behind geeks in CA but we’re catching up...the tech piece of buy side firms will be very different this year than last...cloud is happening whether we like it or not” - HD of Global Operational Risk, asset manager

“ROI isn’t only driver, our tech could be obsolete or we have a vision to execute” - Board member, exchange

“Our technical operations expenses have declined 4% since 2012 due to our private cloud initiative... the cost savings potential is massive.” - MD (IT) Top Ten IB

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Cloud Services Partner

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73% OF FIRMSSPENT MORE MONEY ON MANAGING THEIR CLOUD IMPLEMENTATION THAN THEY PREDICTED

Source: SungardAS/TABB Group

66% OF FIRMSMOVE AT LEAST 1/3 OF THEIR CLOUD INFRASTRUCTURE BACK ONTO THEIR PROPRIETARY PHYSICAL INFRASTRUCTURE

Source: SungardAS/TABB Group

Cloud Service Partner must have clear and

complete understanding of your business and

technology needs

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Cloud IAAS has improved

Cloud Infrastructure As A Service offerings have significantly matured over the past number of years

Better resiliency Better monitoring Better security Better operations

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Views from the Buy Side

“The challenge is that while some embrace it, some feel like it will threaten their job.” MD of Data – Top 10 Buy Side  

“I don’t see it as a job eliminator more of an opportunity for you to learn new technology on a new platform. Either get on board or it’s going to run over you.” MD Infrastructure – Top 10 Buy Side

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Views from the Sell Side

“When you really think about it adoption of cloud delivered market data services should not be seen as controversial. It can be said that Bloomberg and Thomson Reuters deliver cloud based market data.”MD Market Data Services – Tier 1 Sell Side “Firms like mine have 100s of servers dedicated to feeding market data … it doesn’t need to be structured this way. People in my position need to get over having kingdoms and focus on supporting the firm.”MD Infrastructure – Tier 1 Sell Side

“The challenge here outside of performance is that moving to lower cost options can leave stranded costs making service delivery higher for some while it becomes lower for others.”MD Market Data Services – Tier 1 Sell Side

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Cloud – A multi-layered offering

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Market Data Cloud Basics

Universal Data Aggregation

Collect and manage data sources and distribution

Advanced API Suite

API structure(s) for ease of application integration

Client Applications

Lower cost of ownership – Enhanced flexibility

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Front office services going to the Cloud

The capital markets community is clearly moving to cloud based services

EMS is moving to third-generation platform, cloud-based solutions.

Evolution of EMS to a multitude of tightly integrated end-to-end services is allowing buy- and sell-sides to outsource entire front-office tech stacks.

Users of third-generation EMS save significant time and money, no longer needing each change to be an IT project. 

New model saves on support costs, facilitating investment in integrating new services rapidly.

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Breaking Down Walls to Cloud Services Adoption

Lower Cost of

Ownership

Service Level

Agreements

Data Completene

ss

Flexible Delivery Options

Risk / Compliance

Review a MUST

Hybrid Services /

Application Environmen

ts

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Cloud Market Data Transition

Only ultra-low latency use cases may be excluded from consideration

Opportunities to support development / operations environments and then transition to production

Start with exchange data and leverage standards Explore application cloud relocation opportunities to be supported

by cloud delivered market data services Begin to reduce on premises distribution infrastructure and

associated vendor cost and lock in

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Conclusions

The market place is moving toward cloud services for both front and back office applications

Maturation of Cloud Infrastructure As A Service enables new service providers to operate with surety and high quality offerings

Market data services are available and capable to be delivered from the cloud

Realize a more flexible commercial and technology infrastructure to support new and legacy data needs

Opportunity for a phased approach to realize benefits now and transition to more efficient overall cost of ownership over time

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