NYSE’s “Tick as a Service” shows cloud use is growing in the capital markets

Rik Turner, Senior Analyst, Financial Services Technology

NYSE Technologies, the technology products and services arm of the New York Stock Exchange, is teaming with UK software developer First Derivatives to launch “Tick As A Service,” an offering that will enable firms carrying out backtesting on algorithms and compliance checking to access large volumes of historical tick data directly from its facilities.

Payment is currently by monthly subscription rather than on a pay-per-use basis, and the data is presently stored separately for each customer, but the plan is to move to a central store, which suggests on-demand payment will become possible.

Ovum sees the launch as a further sign of the advance of cloud in the financial markets and recommends that companies with large-scale backtesting or compliance workloads consider the new service.

Data-as-a-service helps reduce capex on hardware and management

The partnership with First Derivatives is designed to enable companies that currently collect and store large quantities of historical data, for backtesting, compliance, or indeed both, to avoid the need to store it in on-premise storage infrastructure. On-premise storage is both costly and inefficient from an IT management perspective.

Backtesting itself is already moving to the cloud

Part of the logic behind this move by NYSE, aside from the ability to monetize historical data as a service, is that for many larger institutions, backtesting has already migrated from on-premise servers to processors for hire from one of a number of infrastructure-as-a-service cloud providers, such as Amazon.

Indeed, NYSE already offers such a facility itself on its cloud infrastructure, the Capital Markets Community Cloud, which was launched in 2011. If a company is carrying out backtesting on a cloud (whether private, virtual private, or wholly public), it is clearly counter-intuitive to be required to store the historical data that it will use as its input on its own premises.

Compliance is a newer application for historical data

The compliance angle is an interesting evolution of the use of historical data. If a company needs to check that it has been compliant with a given piece of regulation in the last couple of days, such as the Best Execution requirement in either the US (under Regulation National Market System, or RegNMS) or Europe (under the Markets in Financial Instruments Directive, or MiFID), one way to do so is to run its trading logic, as instantiated in software, against the tick data on which it has been operating.

Alternatively, it could adopt a forward-looking strategy to guarantee the future compliance of algorithms that it has yet to introduce, by running them against large quantities of historical data to see if they would have enabled compliant behavior had they already been live in production. Again, such routines can conveniently be run in the cloud, so it makes sense for the historical data to be sourced in a similar manner.

Put Tick as a Service on your radar and expect others to follow

Ovum recommends that market participants that require large volumes of historical data for backtesting or compliance checking give serious consideration to Tick as a Service.

Obviously it makes more sense for firms trading on any of NYSE’s exchanges (it currently owns the Euronext group of exchanges in Europe as well as the Liffe futures exchange); the data itself will be relevant to these firms, and they will have existing connections to the Secure Financial Transactions Infrastructure (SFTI) intranet over which all NYSE’s trading venues are accessed, and over which Tick as a Service will be delivered.

For firms not trading on NYSE exchanges, the service will probably be of little interest, while for firms trading across multiple venues, Ovum suspects that the service will come into competition with potentially more comprehensive offerings from exchange-neutral data aggregators such as Bloomberg and Thomson Reuters, which will be good for customers.

Tick as a Service is the first of a series of cloud-based services that NYSE Technologies plans to develop with First Derivatives, the portfolio of which also includes products for the backtesting itself, reference data management, price acquisition and enrichment, and risk management. Ovum expects that the entire portfolio will eventually be offered as a service in partnership with NYSE.

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