The Power of the Cloud: Why this technology is such a good fit for FX

According to Vikas Srivastava, CRO, Integral, the FX market’s evolution from voice trading to electronic trading and from manual to automated processes, has made it a much better fit for cloud services. “If you look back far enough, everything in the FX market was manual and voice-driven but we have seen more processes become digitised and automated. Typically, institutions used to run high maintenance, on-premise legacy systems which stand in contrast to the benefits that can be gained from cloud computing,” he says.

These benefits, says Srivastava, include faster deployment of tech; greatly increased agility and flexibility; reduced infrastructure costs and constraints; fully customisable technology that is built for scale; instant access from any location with internet access and frictionless updates with Software-as-a-Service (SaaS) solutions.

“FX providers who’ve migrated to the cloud are able to access state-of-the-art technology at a fraction of the price it would cost to build their own,” says Srivastava. “They can deploy pricing engines, algos, connectivity and distribution tools, as well as make prices, obtain liquidity and host algorithms in a low latency configuration in a matter of weeks – this has been a game changer.”

Workflow benefits

At the heart of all these benefits is workflow. “Workflow is unique to each organisation – their processes and their way of interacting with clients. On-premise solutions are much more rigid. Any required changes to the system put you on the back foot. With the cloud, you can deploy and update technology much more quickly. Workflow automation involves interoperability and requires an API-first tech strategy so that other apps, services and systems can connect and that tends to be more prevalent in cloud services. It is better, quicker and cheaper.”

A significant factor in the increased adoption of cloud services was the global pandemic and the enforced move to working from home, says Srivastava. “The pandemic helped shift attitudes and made the benefits of the cloud much more widely accepted. Those that used the cloud were able to move seamlessly to working from home. This was in contrast to those firms that had an on-premise system that wasn’t designed for hundreds of remote users. Overall, people are much more comfortable in the cloud in both their professional and personal lives,” says Srivastava.

Research conducted by Integral found that the vast majority of trading in the $6.5trn-a-day FX markets is expected to migrate to the cloud by early 2026. There have already been several high profile migrations in the financial services industry in the past year. German exchange Deutsche Börse has selected Google Cloud to provide the backbone of its digital assets business. Meanwhile the London Stock Exchange Group struck its own deal with Microsoft that would see a number of core services migrate to the cloud. It is not just exchanges. State Street has engaged both Microsoft and Amazon Web Services.

Another survey, conducted in 2022 by McKinsey, found that while most financial services firms have a presence in the cloud, only 13% have more than half of their IT footprint in the cloud, even if 54% said that they intend to migrate at least half of their workload to the public cloud within the next five years. According to McKinsey, financial institutions in the Fortune 500 could generate as much as $60 to $80 billion in savings.

“There are multiple reasons to believe that firms are shifting towards cloud-based technology as a central component of their technology stack,” says Srivastava. In fact, he says, the continued acceleration and demand for tier-one technology that Integral has seen might mean it is sooner than 2026 when the majority of firms are trading their FX in the cloud. “While it was our thesis that firms are looking to migrate, we were surprised by how many more market participants will have access to great technology without an increase in total cost of ownership (TCO).”

One major implication of greater adoption of cloud technology and an FX market where the majority of activity takes place in the cloud is a greater need for interoperability. This is especially true for managed data services in the cloud. “In general, having one source of data makes everything easier: the aggregation, data analysis and the ability to draw better insights from the data,” says Srivastava.
“Our cloud-based SaaS technology allows clients to gain a holistic view of critical business functions and FX activity and the data science tools empower them with actionable intelligence. In addition, there are real-time trade monitoring and intuitive BI tools to help make executive decisions in all spheres and phases of the FX workflow. The key is actionable insights from the data and being able to slice and dice it in a way that suits your business – which is why there is a need for flexible tools.”

So what should a firm be looking for from a prospective cloud provider? “From a customer’s perspective it is about finding a trusted and proven provider who has reliable technology, can improve efficiencies and the experience they offer their customers, and ultimately give them technology that supports their business growth with flexibility and scalability,” says Srivastava.

“It is about understanding your customer’s pain points and using technology to solve them and allowing for customisation by configuration as even the individual needs by customers are so different,” says Srivastava. “It is also important to know the details of the provider’s offering. For example, do they have a multi-tenant model or are they hosting bespoke software? Can the provider really be trusted because reliability is as important as the functionality.”

Data in the cloud

FX market participants have long recognised the value of cloud services to manage ‘big data’ storage and processing demands arising from algo and automated trading strategies, regulatory reporting and the need to collect and manage huge volumes of data in an efficient way, says Ganesh Iyer, Chief Marketing Officer at IPC Systems. “Storage facilities are relatively cheap to use (no physical storage costs, pay for what you use consumption models), infinitely scalable and easy to access. Data held ‘in the cloud’ can be accessed as required to support specific internal and external business analysis, risk management and reporting functions, managed still through traditional infrastructures and platforms. FX market participants also recognise the far greater value and opportunity presented by cloud technologies with respect to global market connectivity, data distribution and communications that support enhanced performance, client engagement, and nimble, go-to-market product and business strategies,” says Iyer.

“It is important for trading firms to distinguish between the different types of cloud technologies available and the respective benefits in terms of FX trading and workflow requirements, Public clouds are accessed via the internet and shared with multiple users and organisations. They are the most widely-known and used cloud models – think emails and gaming apps – offering flexibility and almost infinite scalability and are geared particularly well to software development and deployment,” says Iyer.
Public clouds are typically accessed with low-cost subscription or consumption-based models that may also be linked to different service-level agreements. Cloud vendors are responsible for managing service delivery and performance, reducing financial firms’ inhouse IT resource requirements. However, says Iyer, “public clouds are de facto not as secure as private clouds and are therefore not suitable for many mission-critical financial services activities, including trading, payments and other market data and time- sensitive functions.”

While there are examples of shared private clouds, they are more typically used by a single organisation, says Iyer. “Computing resources are managed within a secure private network on site, or more usually in third-party data centres. Regulated financial firms subject to rigorous security, confidentiality, data protection and performance obligations benefit from the high reliability, security and customisability of private clouds,” says Iyer.

“Both public and private clouds are flexible and scalable. The key difference between them is that purpose-built private clouds are not vulnerable to activity surges or unpredictable events such as may be caused by another party ‘sharing’ the service. Private clouds are more expensive to operate than public clouds, particularly if they are owned and maintained by financial institutions themselves. They also require initial capital investment to set up. There may also be challenges around remote and mobile access given the need to maintain the highest levels of security and data confidentiality,” says Iyer.

“For FX market participants, hybrid cloud solutions may offer the best of all worlds with respect to meeting the myriad and changing performance, security and compliance obligations,” says Iyer. “Low-cost public cloud services support non-sensitive workflows (e.g., data storage) while private cloud solutions support mission-critical trading operations. Service reliability can also be enhanced through the distribution of services across multiple data centres, private and public.” Regardless of the specific cloud combinations desired by different types of market participant, managed “cloud-as-a-service” and “network-as-a-service” consumption models offered by specialist service providers can mitigate the cost and risk of significant direct investment in cloud connectivity and service capabilities – as well as the arguably greater risk of being left behind as new technologies and applications become mainstream,” says Iyer.

“Accessing the cloud as a managed service has the further advantage of ensuring that any and all service enhancements made by the managed service provider with respect to its own cloud connectivity will automatically benefit all of its managed service customers. A managed service strategy also grants greater flexibility in terms of switching between service delivery models since it removes the need to invest in and maintain rigid internal infrastructure and gets rid of long-term contractual obligations to a service provider,” says Iyer.

So what factors are influencing market participants’ choice of cloud provider? “All cloud providers are potentially ‘suitable’ with respect to their overarching proposition of facilitating fast, high volume data processing, storage and management. What we are seeing in our extensive market participant network, however, is a more considered approach to cloud adoption that tends more towards multi-cloud and hybrid cloud/terrestrial solutions that deliver the best all worlds from a risk (security), reliability (resilience) and performance (latency) perspective.” Says Iyer

As such, no single cloud service or solution will likely meet all of a firm’s or institution’s needs, says Iyer. “Our customer (market practitioner) surveys suggest that the majority of financial firms will implement a combination of private, public and hybrid cloud solutions to satisfy particular market access, operational and distribution models and to manage multiple interrelationships in the transaction supply chain.”
“It is important to shop around and to maintain unfettered access to best of breed services. Platform independence from any single cloud provider allows businesses to move application delivery environments around based upon shifting factors like performance, cost, compliance, and geo-political events. Ultimately, this provides agility. Conversely, reliance on a single cloud provider, and building around that provider’s capabilities and tools rather than in the context of a cloud-agnostic delivery strategy, can create what has been described as the ‘Hotel California’ problem, where it is free to enter but much more difficult to leave. A multi-cloud strategy supports mutability and portability of applications and datasets between domains while also supporting compliance and data sovereignty obligations (and challenges) that are critical to all financial markets participants,” says Iyer.

Financial institutions are, to a certain degree, compelled to embrace the ‘power of the cloud’ in order to stay relevant in an increasingly challenging competitive environment, particularly with respect to new, non-bank and typically cloud-native industry disruptors, says Iyer.

“In terms of front-end trading applications, it is still relatively early days for cloud ‘proof of concept’ and the FX industry – like others – is still somewhat circumspect about full-on cloud adoption. There is, nonetheless, a steady adoption of other aspects of cloud services, and it is inevitable that in time, order management systems and core matching functionality will migrate to the cloud,” says Iyer

“Cloud adoption is the foundation-stone of digital innovation, the starting point for firms to completely rethink how they access and manage high-cost, high-maintenance operational resources (network and communications infrastructure, data storage, client connectivity etc.), shifting business mindsets beyond pragmatic ‘build or buy’ investment decisions to embrace much nimbler ‘as a service’ business models,” says Iyer. “The success of this approach – in terms of measurable performance and more creative decision-making – will be linked irrevocably to the robustness of the connectivity between a firm’s operational workflows and the cloud.”

Digital transformation

The most obvious reason that cloud computing is a good fit for the FX market is the increased use of technology, according to Gordon McArthur, CEO of Beeks Group, a cloud provider for the financial services market. “The FX market has been undergoing a fast-paced digital transformation, with the adoption of advanced technologies such as algorithmic trading, high-frequency trading, and the use of artificial intelligence and machine learning for trading strategies. There’s also the rapid growth of the retail trading segment itself. With more and more individual traders participating in the FX market, there’s an increasing number of online brokerages and trading apps. This has made it easier for retail investors to access the market and electronic trading platforms have become more prevalent, making it easier for participants to access the market,” says McArthur.

“The FX market has embraced cloud computing to improve scalability, cost efficiency, accessibility, data management, security, and disaster recovery. Cloud computing is constantly evolving to help FX providers adapt to market challenges, in particular the complexities that can come from deploying infrastructure. The cloud’s flexibility and robust infrastructure have become integral to the operations of FX brokers, traders, and other market participants, helping them stay competitive in a rapidly evolving industry. With cloud computing FX markets can receive rapid deployment of infrastructure quicker, cheaper, and more flexible than before.” Says McArthur.

As already outlined by Ganesh Iyer, at its core, there are two distinct cloud types – public and private. A hybrid cloud is a cloud computing environment that combines elements of both public and private clouds, allowing data and applications to be shared between them. It’s essentially a combination of on-premises infrastructure, private cloud services, and public cloud services to create a unified, flexible, and scalable computing environment.

“The main concerns over the public cloud are around security, regulatory requirements, ultra-low latency performance and system monitoring and management – all vital ingredients in trading technology,” says McArthur. “Organisations in this space will shy away from services which do not allow maximum control over data locality and sovereignty, and which threaten optimal performance,” says McArthur.

“Public cloud is still part of the toolkit for non-critical workloads, but trading firms need the control, security, and flexibility that private cloud provides. The vendor has even designed its own hybrid cloud service, with a private cloud environment that can be installed on premise and can integrate quickly to public cloud.” Says McArthur.

McArthur agrees that cloud computing has had a democratising effect on the FX market by providing affordable, scalable, and accessible technology solutions that enable traders and institutions of all sizes to compete on a more level playing field. “Managed cloud providers allow a broader range of participants, including smaller firms and individual traders, to compete on a more level playing field with larger institutions, ultimately enhancing market diversity and liquidity. This fosters innovation, diversity, and increased competition, ultimately benefiting the FX market as a whole.” Says McArthur.

“Consequently, both buy- and sell-side firms in the FX market should consider managed cloud services. Managed cloud services are designed to scale with the needs of the user. Whether they need to increase or decrease resources, managed service providers can quickly adapt to changes in their workload and user demands. This can lead to improved efficiency, reduced risks, and better overall IT performance. By offloading cloud management tasks to managed service providers like us, firms can focus on its core competencies and strategic initiatives, allowing them to be more competitive in the industry.” Says McArthur.

“Cloud managed services provide real-time and historical data related to currency exchange rates and other relevant financial information. They’re designed to meet the data needs of various financial institutions, traders, and businesses involved in the FX market. Typical services are data aggregation, real-time data feeds, historical data, data normalisations, API access, data security, scalability, redundancy and reliability, monitoring and alerts, compliance and reporting, support and maintenance customisation and cost transparency. Overall, a fully managed FX data service in the cloud offers a convenient and reliable way for financial institutions, traders, and businesses to access the critical FX data they need for trading, analysis, and decision-making while also benefiting from the scalability, security, and accessibility advantages of cloud technology,” says McArthur.

Security

Security always used to be a major obstacle to the wider use of cloud services, but there has been a concerted effort to address this in recent years, according to McArthur. “Around five years ago financial services became a primary target for DDoS attacks, which was well published at the time. Beeks understands the critical importance of security, reliability, and low-latency access for our clients, and we make significant investments in infrastructure, technology, and expertise to meet these requirements. We continually evolve to address the evolving landscape of cloud computing and cybersecurity,” says McArthur.

The firm has invested in its security to meet the demanding needs of its clients, in terms of high-performance networking, Service-Level Agreements (SLAs), redundancy and failover, DDoS protection, security compliance, security services, security auditing and logging, data backup and recovery and continuous improvement. Beeks has also partnered with security vendor Blue Voyant and also obtained compliance with certified security standards like ISO 27001 and SOC.

According to McArthur, there are several factors that can impact the performance, security, and overall success of your FX trading operations, but the most critical would be latency, performance, reliability and pricing model. “For FX trading, ultra-low latency is crucial,” he says, explaining that Beeks infrastructure is built within data centres strategically located near major financial hubs to minimise latency.

The vendor has also built a high-performance fabric offering high-speed, redundant network connections to ensure faster data transmission. “Outsourcing system and infrastructure builds has been a prominent option to relieve the pressure on IT departments in the financial sector,” says McArthur. “Outsourcing to a cloud provider means improved accessibility, performance, collaboration, and customer engagement. Traders and institutions can leverage cloud-based platforms to access advanced tools, streamline operations, and offer more tailored services, ultimately enhancing the overall FX trading experience,” says McArthur.