August 13th, 2020 - Financial, Global Connectivity
By Jeff Mezger, Director of Product Management, TNS
As Infrastructure-as-a-Service (IaaS) gains ground in the global financial markets, it is paramount that firms undertake essential due diligence to prevent unfortunate surprises in the future. Driven by the benefits of turning traditional CAPEX costs into an OPEX model, deploying IaaS is an extremely effective way of lowering total cost of ownership (TCO) when done with adequate research, planning and evaluation.
IaaS allows traders to avoid heavy capital expenses, such as hardware. Instead of making a significant capital expenditure up front, with IaaS, traders only pay a monthly cost and the vendor manages the hardware, data center space, connectivity and other requirements.
This model can provide significant commercial advantage for trading firms, however their choice of vendor is critical. If key requirements are not included in the initial decision there could be some extremely costly, time consuming and complex bumps down the road which negate the benefits that using IaaS was brought on to deliver. It’s, therefore, essential that traders methodically work through their due diligence.
Trading Infrastructure Expertise is Key
Straight out of the gate, traders should look for a vendor that is experienced in delivering global managed infrastructure and connectivity solutions. Working with numerous exchanges, for example, is highly complex as each has its own unique set of rules, standards, connectivity options, etc. If a vendor has limited expertise, the process of turning up exchange connectivity could easily result in trading delays or unexpected costs.
In the IaaS model, savings on hardware costs can be substantial, especially in overseas locations where hardware is difficult to procure and manage. Even the typically simple logistics of procuring and installing hardware can cause costs to mount exponentially, before you begin to consider importation and tax implications.
Check for Network Engineering Credentials
Traders should be aware that being able to deliver a trading infrastructure is just the first step. Network expertise in-house is the next component which traders should look for when evaluating vendors. Having the ability to establish datacenter space and exchange connectivity is helpful, but bringing all these connections together using the lowest latency routes available requires a high level of engineering skills.
Exchanges also make regular updates and keeping up with these can be challenging. At TNS we are in constant contact with the exchanges and have seamlessly transitioned our clients’ connectivity, when needed, to maintain continuity of service. While some changes may be minor, the increase in exchange consolidation has also presented a number of major infrastructure adjustments in recent years.
In line with this, network capacity and resiliency are also critical and this has never been more prevalent than during the COVID-19 pandemic. In the past few months, the financial markets have experienced multiple, prolonged periods of extreme trading volatility. It’s important to know that TNS customers reported that we maintained zero packet loss across our network even during the most volatile days so far which were in March and June. More importantly, we fully anticipate these types of swings to continue as the markets cope with a combination of COVID-19 news, economic fallout and global government reaction.
Global Reach with Local Support Offers the Greatest Flexibility
Once you are confident of a vendor’s trading infrastructure and network expertise, look carefully at their reach and how they support their network geographically. Today’s desire to trade in many foreign countries leads to potential language and cultural barriers that don’t exist in your own market. The most advantageous situation is to select a vendor with global reach supported by local, on-the-ground, personnel that are fluent in both the language and unique exchange requirements. This helps to reduce the time-to-market and will enable any troubleshooting and corrective measures to be actioned far quicker and more effectively, than from overseas.
It’s also important to evaluate if the vendor can support your future growth. When a trading firm chooses a vendor with limited reach, there will likely be cost implications when they expand their global footprint in the future.
Addressing the critical success factors, TNS has explored in this blog will help to ensure that your choice of an IaaS vendor firmly positions you for growth and can deliver global scale. A knowledgeable, experienced and flexible partner can relieve the burden of establishing and maintaining a trading infrastructure while allowing you to focus on your core trading activities.
If you would like more information on how TNS’ IaaS can help you, click here to have a TNS Account Executive contact you.
Jeff Mezger is Director of Product Management at TNS with responsibility for its managed services for the financial industry. He oversees product development and strategy for market data, exchange relationships and data center services.