Platforms-as-a-Service: Offering a quicker route to market for the coming Digital Asset age

As businesses try to streamline their operations and reduce their costs, whilst simultaneously improving their offering to their clients, Platform-as-a-Service (PaaS) is taking over as best way of delivering this.  Whether they are a new broker coming into the space with a desire to hit the ground running in the quickest and most cost effective way, or they are an established broker looking to either replace their existing trading infrastructure or add an additional platform in order to add different asset classes to their offering, then PaaS solutions can be cost effective and easy to manage option.

How the model works

The traditional model for trading platforms requires a considerable investment by the broker, one far beyond the cost of the platform licence.  When many brokers look at purchasing a suitable platform, they consider only the initial cost of the platform rather than the total cost of running and maintaining the platform as well.  PaaS provides a more accessible way of entering the market, in which the platform, hosting and management are all provided in a single package.

What are the benefits of PaaS

Implementing a PaaS solution will prove beneficial in both cost and efficiency.  Not only do standalone platform providers typically charge a lot just for their software only solutions, but they also have additional hidden costs that need to be accounted for when deciding to go for a standalone platform or PaaS.  

The first of these hidden charges is the cost of hosting.  If they do not operate their own tech stack and have cabinets and hardware in their own data centre, then a broker would need to engage with the likes of Equinix to rent a managed server for this purpose.  This can be done in environments such as Microsoft Azure, however, care should be taken to ensure that the connectivity is fast enough for a brokering business.  In addition to having a primary server, the broker will also need to have a secondary server in order to have redundancy built into their set up.  This additional expense is avoidable by using PaaS.  A traditional platform will also take longer to set up and require more resources to manage.

If a broker does opt to have their own trading platform, they will need to have suitable staff in order to run it. How many staff would be a minimum requirement? When one considers the boundaries put in place though trading hours, sick days and holiday leave, a broker would likely need to ensure a minimum of three dedicated staff to both set up and run the platform.

Once a broker has all this place, they would then need to connect their new trading platform into the rest of their infrastructure.  If they have used one of the more popular platforms, then this may be less complicated but could require a large amount of additional work or could require third party solutions, such as bridging, and therefore another increase in cost as well.

If all this sounds complicated, it is. The impact of this is not only increasingly high costs, but also the time it takes to set up.  If a broker is starting up, then this implementation will severely delay them going live operationally, therefore effecting how quickly they will become profitable.

In the PaaS environment, the platform already exists and is already hosted (and likely to be already connected to most of the associated technology). This technology is able to be hosted in a segregated environment rather than on a stand-alone machine. As a result of this, it is much easier and quicker to set up a new entity as everything is physically in place.  

Another benefit PaaS is that it is a managed service, meaning that there is no additional requirement to have a separate staff.  This will either reduce the requirement to recruit more staff or to train your existing staff on a new platform that they are unfamiliar with.

The combination of these factors results in the real costs of PaaS being substantially less than running a standalone platform.  The requirements of a start-up broker to be operational quickly and cost effectively are far more likely to be achieved by using a PaaS solution.  

Chris Ward, CEO, Star Hat Solutions Ltd summarises the advantages of PaaS by pointing out that, “The benefits to market participants are manifold. We are leaving a time where a few players have stagnated the technology. Now the ability for the PaaS technology providers to innovate for their customers, utilising the latest technologies such as using AI in analysis and automated trading strategies, makes for a vibrant future.”

What attributes trading firms need to look for in this type of service 

For most brokers, the key requirement is to be able to White Label the platform so that it looks like their own platform rather than a generic solution.  Moving away from the mainstream platform providers allows them to offer something different from their competitors.  Additionally, it also makes their clients less vulnerable from being poached by a competitor. The ability to offer multiple asset classes is becoming increasingly important as brokers try to open up new markets.  

Traditionally, most platforms specialise in certain asset classes, but brokers are increasingly wanting to offer products such as Cash Equities, Futures and Options to their existing client base.  Most traditional platforms are focused on a single asset class, which then requires multiple platforms to deliver the wide range of asset classes.

Support should be high up on the list of attributes as this should reflect the market hours.  24/7 support allows the broker to concentrate on what is important for their business, such as acquiring new clients rather than having the headache of looking after their infrastructure.

Another consideration when choosing a PaaS service is the flexibility of the offering. Most packages already come highly specified, but consideration should be given to looking at any additional services that may be required.  These can vary considerably and will depend upon the broker’s business model and their client base.  Typical examples of this include risk management packages, MAMs, client portals etc.

How to go about integrating PaaS into legacy architectures

Implementing a new system from scratch is often complicated and therefore having the ability to integrate into existing infrastructure is far easier with a managed platform. As  the platform is provided as a managed service, the platform provider will do the complex part of integrating the broker’s existing infrastructure.  For a new broker, the managed platform will often come with a suitable web-trader, back office and bridge, meaning that no additional integration will be required.  The key is for the broker to provide an accurate topography to the PaaS provider so that the full extent of their requirements is understood at an early stage.  

Once again, most PaaS providers already support the various different APIs that are required in order to operate these sorts of services.  They will already be connected to the likes of the KYC providers and payment providers that a broker will inevitably need in order to operate their business.

On this point Jon Light, Senior Director of Product Management at Devexperts says that “It’s important for a platform to provide a full suite of APIs that allow firms to control trading, risk, accounts, and workflows at a granular level. Support for FIX, REST, WebSocket APIs, and messaging technologies such as SQS, alongside a sandbox environment for testing, makes it possible to integrate cleanly with existing systems and architectures.”

Offering a quicker route to market for the coming Digital Asset age

The trading of Digital Assets has been on most broker’s radar for some time and the ability to trade the products seems somewhat different to traditional markets at first glance.  There are, however, a lot of similarities too.  Trying to adapt an existing platform to trade Digital Assets when it is an off the shelf solution is unlikely to be possible.  The requirements needed to offer wallets etc. are quite different to how the traditional markets work. Digital Assets will be playing an increasingly more significant role in the industry going forward.  The continued adoption of stablecoins is already changing the industry and the move towards increased tokenisation is gaining momentum. There are even PaaS solutions that exist which can connect into their own distributed ledger technology (blockchain), consequently allowing the broker to create their own tokens.  

Choosing a provider

The key to choosing a PaaS provider is for a broker to consider what their future requirements may be, rather than just looking at what they may need in the immediacy.  The trading markets move quickly client’s requirements change over time.  In recent years we have seen brokers expand out of the traditional FX and CFD type offerings to embrace different asset classes.  First there was the drive into Crypto trading. A few years later we have seen the rise of Cash Equities.  The latest trend is being able to offer Futures and Options. Both these asset classes require considerably different trading infrastructure to what has come before, and the platform environment needs to reflect this.  What will the next big thing be? Tokenisation has been around for a while but has not taken off in the way that it should.  Or maybe it is something new that we have not yet considered.  The recent rise in Prop Trading has shown how brokers are looking at new areas in order to remain profitable.

How does this affect a broker’s choice of platform?  The most considered choice is to opt for a solution that can cover all these requirements and can adapt in the future.  PaaS is now well established and provides a cost-effective solution in an ever-changing trading landscape.

Roman Nalivayko, CEO, co-founder at TraderEvolution Global Ltd concludes by saying, “This is precisely why ‘Platform-as-a-Service’ is no longer a buzzword but a strategic choice. In an industry under pressure to go multi asset, to embrace Digital Assets, and to demonstrate institutional grade control of its technology, PaaS offers a way to behave like a proprietary tech house without disappearing into a five year, eight figure build”.