Whether capital market participants choose to deploy private or public cloud technology depends on several factors.
Yet given the different customer profiles and sector expectations, it is unlikely that one will be chosen exclusively over the other, with most implementations presenting a hybrid configuration.
Established financial institutions with legacy technical environments need to choose their digital migration path carefully so as not to compromise their existing business platforms.
Meanwhile, new Fintech trading organisations without any legacy, land-based infrastructure, are looking for solutions which enable them to stay focused on their applications with minimal costs of service.
While the technological advancements in the rest of everyday business life lead companies to be increasingly comfortable with accessing information and services over the internet, the financial sector has particular rising demands for control, security, and guaranteed performance, as well as cost reduction and flexibility.
Financial technology providers will find traditional institutions are unwilling to use the public internet for connectivity. Private connectivity is preferable – which is one key reason why properly configured private cloud environments are so crucial.
Consequently there is no one size fits all in terms of cloud configuration and access for a sector which is both rapidly transforming and guarding its legacy.
This article will examine in more detail what a private versus a public cloud environment is – and give reasons for why private cloud is an imperative choice for financial organisations for at least their trading applications.
A private cloud environment is one which has been built as the solution for a single tenant, with ZERO shared resources with other users.
Private environments offer all the flexibility and agility of the cloud upon a dedicated hardware and network infrastructure.
In contrast the public cloud offers economies of scale through shared resources accessible over the internet, where entities of all shapes, sizes, purposes and objectives are congregating.
While the public cloud is typically extremely cost-effective to access, it does carry some ‘gotchas’ which financial sector businesses need to be aware of.
A lot of legislation and jurisdictional requirements in the highly regulated financial sector mean that organisations need to always know exactly where their data resides.
This condition is more securely met through a private cloud implementation, where an organisation can literally apply a postcode to its data storage even in a cloud environment.
It is not always possible in the public cloud to ‘point to’ the physical location where data is being held. In addition, should data cross borders for reasons of cloud service performance optimisation this could introduce regulatory breaches and liabilities to data owners.
Since a public cloud environment shares resources on the internet with all types of users there is less control over spikes in activity.
For example bandwidth reliability could be an issue if an organisation’s data is being stored next to resources that are required for Christmas shoppers, tax returns or even concert ticket releases.
Private cloud environments eliminate these issues totally. There is no uncontrollable external call for resources, which means that the platform is entirely at the disposal of the single tenant.
Mission critical workloads common to capital markets trading are intolerant of latency that runs to more than a few micro-seconds.
Public cloud access cannot give any low-latency guarantees, so it is wise to consider whether the internet can provide the carrier-grade connectivity required. For example, some financial applications do not work if the latency is above 5 milliseconds.
It is important to remember that the topic of security is more far-reaching than data or privacy.
Knowing exactly where data is being stored in a private cloud environment also affords organisations the confidence in the resilience and security of its power supply.
Unknown public cloud data locations could well be vulnerable to power outages – such as the recent problems in California or Texas – when the user base cannot be sure exactly where in the world the data resides, nor whether the location’s power supply is infallible.
Of course, using a mix of private and public cloud is a distinct possibility – yet even so these must be judiciously considered.
Data ingress and egress from a public cloud environment, for example for analysis purposes, can prove costly, and defeat the object of choosing public cloud services in the first place.
In contrast private cloud implementations incur no costs associated with transiting data.
Given the multiplicity of exchanges, co-locations and trading venues around the world financial organisations should be able to expect exactly the same platform functionality wherever they are participating. This builds confidence in the security and resilience of the platform.
Private cloud environments have the advantage of offering consistent and replicable functionality, security and performance whether situated in London, New York, Singapore or mainland Europe.
As specialists in the technical infrastructure underpinning capital markets trading Beeks Group is highly experienced and knowledgeable about all the different permutations of private and public cloud capabilities, and how far these are suitable for the needs of financial institutions.
We offer secure, high-performance, guaranteed private cloud infrastructure all around the globe, and can accommodate exclusive, single-tenant security requirements, as well as replication of hosting.
Whilst Beeks recognises the cost-effective value of public cloud shared resources offering businesses cost-effective services, we also recommend a ‘horses for courses’ approach. This means ensuring that our customers align the importance of their workload with the relevant solution.