While institutional trading may have been an exclusive club dominated by industry giants, the ability to now outsource infrastructure-as-a-service opens the door for a more robust market to emerge. In partnership with managed service providers (MSPs), the next generation of fintech innovators are cracking the code of hyperscale trading operations.
Gaining competitive advantage means partnering with MSPs to democratize access, compliance and staffing. Cracking the code to these barriers is not an all-or-nothing proposition, neither does it require losing operational control. Instead, carefully orchestrated MSP agreements can help fintechs focus on their core competencies and get to market faster by removing resource-heavy business burdens.
Here are three ways an MSP can help:
1. Provides Access to a Robust Infrastructure
High-speed, ultra-low latency access to secure trading infrastructure helps fintechs meet institutional standards. MSPs can bridge the gap between trading centers and multi-channel networks that are morphing every day under the pressure of technical paradigm shifts. From AI and algorithmic trading to blockchain computing and cross-market hedging, the sheer volume and complexity of financial exchange is too robust for fintechs to staff and build themselves.
For a company to keep up and remain focused on its own customers, it’s better to buy the MSP’s team, knowledge and technology than to build it alone.
2. Navigates the Compliance Maze
To stay competitive, every financial services organization must navigate the compliance ecosystem. Compliance complexity is accelerating with the impact of more sophisticated, nation-state cybercrime and next-generation security framework overhauls. With increasing volatility, trading needs to be seamless with access to multiple exchanges, and agnostic to time and place.
With boots on the ground and deep local knowledge, MSPs can navigate the ever-changing legal and compliance hurdles in every region. For fintechs working independently with in-house resources, it’s very difficult to afford that level of expertise in the fragmented world of regulatory adherence and political upheaval.
Effective colocation and hosting must span the globe. Data center relationships, in-country know-how and language skills are imperative to doing business across cultures.
3. Achieves Faster Onboarding
Single-vendor MSP solutions can lower costs by encompassing infrastructure, procurement, implementation, monitoring and management. Existing and pre-approved relationships with telcos and software vendors streamline international implementations.
For buy- and sell-side brokers, banks, market makers and data providers, a well-executed MSP relationship provides seamless connectivity, expert hosting and the uptime assurance necessary to access and optimize hybrid trading environments.
What’s Next for MSPs
Cloud migration, end-point dispersion, and changing buyer/seller behaviors accelerated after the pandemic. Gone are the days when trading infrastructure was optional. Low-latency Layer 1 connectivity, high scalability, uncompromised connectivity, and access to the full data service supply chain are competitive requirements.
With this, a new trading infrastructure has emerged where size doesn’t necessitate agility and more players are able to harness new exchanges, broaden their reach and scale, and gain market share faster than their incumbent competitors have ever seen before. By orchestrating an MSP’s capabilities instead of their own, trading organizations of all sizes can focus on their core expertise.
Jeff Mezger is Vice President of Product Management at TNS and oversees product development and strategy for market data, online and data center services for its Financial Markets business