Cloud is King: Why the FX Market is Pivoting to Configurable SaaS Technology
Posted by Colin Lambert. Last updated: April 12, 2021
Vikas Srivastava, chief revenue officer at Integral discusses the myriad benefits of deploying the cloud in FX markets.
Integral was an early adopter in cloud technology and has been earnestly and enthusiastically banging the drum for well over a decade. We knew that the adoption of trading and workflow systems using Software as a Service (SaaS) could yield material benefits for FX market participants. We also knew it was really just a matter of time before cloud technology became the industry choice.
Yet we were still excited by the results of our recent FX trading technology report, which underscored just how pivotal cloud is set to become in the industry. Based on findings in our report, it is clear that cloud has arrived.
The survey was a fairly comprehensive one, including 94 heads of FX trading and senior FX managers at banks, asset managers, non-bank market makers and other financial institutions across Europe, North America and APAC.
While only two percent of respondents currently have all their FX trading workflows in the cloud, 28 percent expect their FX trading workflow to be entirely cloud-based in just five years’ time. An additional 41 percent of respondents expect a hybrid mix of cloud and on-premise technology within five years. This means that by 2026, a compelling 69 percent of heads of trading and senior managers expect their FX trading workflows to touch the cloud — forming well over a supermajority. This marks a paradigm shift in how FX trading technology will be managed.
Looking at some of the other statistics from the survey, it is easy to see why so many respondents view cloud as a strategic next step for their business. Respondents highlighted cost as the number one concern influencing the decision-making process when upgrading FX tech. The cost-benefits of cloud are well known. In Deloitte’s ‘Bank of 2030: Transform Boldly’ report series, cloud is recognised for helping retail and wholesale banks drive innovation, reduce infrastructure costs, and support improved business performance and shareholder returns.
The potential to reduce cost of ownership is one reason cloud has drawn the attention of nearly every business – not just in financial services – operating remotely the past 12 months, however, the accelerated movement toward cloud in FX has other benefits beyond those realised in 2020.
In today’s hyper-competitive environment where low latency is critical, connectivity and software hosted on private cloud has already proven its value to countless participants. Hosting in key data centres close to liquidity providers and having the appropriate hardware and network stack are both important for achieving low latency – and are perfectly accommodated by private cloud such as that provided by Integral. For less time dependent workflows such as post-trade analytics, public cloud is sufficient.
From a macro perspective, cloud can act as a democratising force for firms operating across the spectrum of FX and capital markets globally. Why? Because cloud technology is synonymous with agility and flexibility. The lower costs, coupled with high-quality technology provided by specialist vendors such as Integral, enables regional and national institutions to compete and win on a global scale. Each institution – no matter their size – ends up with access to top-tier technology that easily accommodates workflows to meet unique business requirements, while also maintaining rigorous standards to meet technology needs. Importantly, it does all this in a timely and efficient manner!
The ability to configure and adapt workflow at a highly granular level, so you end up with FX workflows that are unique to your institution, is something that providers like Integral offer in abundance because of its SaaS based offering.
There are many reasons to be optimistic about 2021 as we emerge from a year that threw curveball after curveball. But we at Integral are looking even beyond 2021 to an optimistic and bright future in the cloud, and judging from the heads of trading and senior FX managers that were surveyed as part of our report, we are not alone! The remaining question for the market is – who will you choose to partner with to modernise and grow your FX business in the next five years?