Unlocking Value In Electronic Trading Through Digital Transformation

Digital transformation is the hot-button topic for CIOs and other business leaders in financial services.

According to Gartner, a full one-third of CIOs in financial services have identified digital as the top business priority in 2019. That's a jump of 8% on the previous year, making digital one of the core battlegrounds as financial services companies jostle for a competitive advantage.[1]

In the financial services sector, the pressure on organisations to undergo transformation has been driven by a wide range of market forces, including (though not limited to):

  • an increased burden for regulation and compliance;
  • the emergence of open banking standards;
  • increased competition from organisations outside of the traditional financial services industry with the advent of virtual-only startups and mobile banking; and
  • the ever-escalating battle over security.

The above trends can be applied to any sector within financial services. From insurance to banking, and from digital payments to electronic trading, firms must evolve to keep pace with industry forces.

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Access to information is vital.

The pressure on Electronic Trading

The landscape is changing at a breakneck pace for the electronic trading sector. As margins decrease and costs increase, electronic trading firms need faster access to information, quicker insights into the market, and transparent, secure systems that can keep up with regulatory and compliance pressures. These can be summed up as the three key trends altering the electronic trading ecosystem – latency, diversity and security.

The electronic trading sector is one that relies on speed and connection between players, but firms will need to push past old boundaries for faster decision-making. With traditional traders increasing efficiency via automation, and technology-enabled, low-cost niche competitors entering the market, the lowest latency can prove the difference between winning and losing a trade.

Thus, with the margin for error and margins on the trades themselves so low, traders are looking to diversify the range of trades they are making to ensure they stay afloat. Increasingly, trading strategies are changing to capitalize on the quality of incoming information, driving creativity in the products that are being traded.

Finally, mounting regulation is increasing focus on both security and transparency. Sensitive client data must be protected at all costs, even as cyber-attacks become more sophisticated; customers also expect access to information that was inaccessible previously.

But are business constraints the only driver of transformation?

Technology ramps up the ante in electronic trading

Legacy IT architecture can no longer keep pace with the seismic changes across the sector. A lack of information integration across front-, middle-, and back-office processes is creating an opportunity for nimbler, better-connected competitors to swipe market share away.

Customer demands for high-performance, low-latency connectivity across locations and devices cannot be met by static and centralized IT architecture. Similarly, delivery of market information is sluggish, depriving traders and customers alike of the sort of market insights needed to make crucial decisions on the trading floor. Traditional IT architecture also limits access to vendors, leading to service delivery being severely hampered.

Meanwhile, better-connected players are accessing big data insights faster, from more sources, and across multiple devices – leaving traditional players far behind.

Distributed connectivity or access to data and service providers – why not both?

A distributed IT architecture solves many of the latency and data analytics problems mentioned above. Meanwhile, private interconnectivity with vendors and market data providers supports quick delivery of market information. Therefore, a rich, interconnected industry ecosystem offers access to premium partners, cloud solutions and the flexibility to match the agility of new market entrants.

All of this can be achieved by adopting an Interconnection Oriented Architecture™ (IOA). This digital architecture strategy, pioneered by Equinix, a leading global data center and interconnectivity provider, seeks to support digital transformation by removing the distance between data exchange points, connecting companies with an unparalleled industry ecosystem and providing advanced security controls to help organisations control their risk.

The securities and trading industry is among the fastest adopters of secure, private interconnection. According to the Global Interconnection Index, a market study published by Equinix, interconnection bandwidth in this sector is projected to grow at 61% annually, being used to interconnect with market data vendors, and cloud and IT providers.

Finding transformation success in electronic trading

With a presence in over 50 metros, and 16 major financial centers across the world, Equinix is a uniquely positioned infrastructure provider that caters to 875+ electronic trading ecosystem participants and provides access to 9,800+ companies on Platform Equinix®.

Electronic trading is undergoing a revolution – lightning-fast trading, access to a diverse and rich ecosystem of partners and vendors, and increased pressure from regulators. By interconnecting with the right ecosystems, and distributing computing across locations, trading firms will be well-positioned for success in the coming digital era of trading.

Find out more about Equinix solutions for electronic trading.


[1] https://www.gartner.com/smarterwithgartner/the-5-digital-transformation-identities-of-financial-services-organizations/