Recent global events have forced market operators to contend with unprecedented volatility and volume. As trading activity continues to test the limits of current infrastructure and the pace of market innovation increases, financial market infrastructures (FMIs) are accelerating their modernization strategies to ensure long-term resiliency and growth.
While software-as-a-service (SaaS) has transformed other industries, broader adoption has only recently occurred in the financial industry, particularly among market infrastructure operators. SaaS is a delivery model in which a technology provider hosts, operates and maintains the software for its customers, most often in the cloud. Deploying SaaS, and thereby leveraging the continuous large-scale product investments by third-party service providers, can help FMIs gain the efficiency, scalability and resiliency they seek.
In working with exchanges and other trading venues around the world on their modernization journeys, we’ve seen five main drivers as to why market operators are now increasingly embracing SaaS to keep pace with participant demands, regulation and innovation.
1. Operational efficiency
Cloud has now reached a level of sophistication and scale to where it can support mission-critical workloads like a matching engine or market data distribution. Moving functions to the cloud can help alleviate challenges with infrastructure provisioning and resource allocation, and deploying SaaS can unlock further efficiencies and cost advantages.
Outsourcing technology and operations to a specialized vendor that takes care of deployment, system monitoring, maintenance, support and upgrades allows the organization to dedicate resources to unique domain expertise, value-add activities and business development.
It also reduces capital expenses related to data centers, hardware and software licensing.
2. Faster time to market
With a scalable SaaS trading platform running in the cloud, market operators can launch new initiatives in less time, providing for an agile “fail fast” approach.
Having the capabilities to iterate and deliver new products and markets without lengthy development and deployment projects could be key in helping market operators capitalize on fast-moving trends like carbon markets and digital assets, whether they are new entrants or existing exchanges branching out into new areas.
3. Risk management
Resiliency and risk mitigation are natural top priorities for financial market operators. But beyond availability, reliable market operations and information security, FMIs must also think about long-term business resilience in terms of attracting and retaining necessary skill sets to keep up with technological developments.
Partnering with a SaaS provider is a means to mitigate reliance on in-house talent and leverage established security standards and operational excellence. The right SaaS vendor can also provide regulatory expertise that’s essential to modernizing mission-critical workloads with reliability and integrity.
4. Continuous innovation and improvement
By subscribing to a SaaS service, FMIs effectively plug into continuous peer innovation with seamless and frequent product releases. Offloading these updates mitigates the risk of becoming reliant on outdated software and processes, or a costly and intensive large-scale upgrade.
Leveraging continuous product investments enables SaaS customers to remain relevant with minimal effort and keep up with evolving industry trends to capitalize on new opportunities.
5. International standards
Today, FMIs typically seek to incorporate recognized global standards that appeal to international investors and open them to new growth markets. A general move away from custom interfaces and features has enabled the development of purpose-fit, cost-efficient SaaS offerings for exchanges, as SaaS doesn’t lend itself well to customer-unique adaptations.
Market participants appreciate established interfaces and features, so leveraging these standards rather than spending on custom implementations is not only more cost-efficient but also helps with onboarding and retention of market participants.
At the same time, existing local customers benefit from standards that bring them in line with global financial ecosystems.
Pathway to modernization
In a world of new opportunities and more open competition, agility and time to value are key. Adopting cloud and SaaS can help FMIs lay the groundwork for modernization that helps them address the principal pressures of volatility and volume.
With Nasdaq’s SaaS-delivered exchange technology, market operators can be up and running with a battle-tested, highly scalable trading infrastructure in a matter of months.
Finding your optimal model
Are you considering SaaS as part of your modernization strategy? Our deployment selection guide can help market operators visualize the main differences between operating exchange technology as a service (SaaS), as a managed service, or self-managed and lists key considerations for choosing the model that best suits their needs.
Image and article originally from www.nasdaq.com. Read the original article here.