Technology alliances in the financial services industry are not new, although a cloud-based relationship involving a major software provider and a London-based high-performance and grid computing vendor is hardly run-of-the-mill. Victor Anderson speaks to Microsoft’s Rupesh Khendry and Excelian’s Andre Nedelcoux about their views on the industry, opportunities for disruption, and their alliance’s value proposition.
What does the current financial markets landscape look like?
Andre Nedelcoux, partner, Excelian: The industry has undergone unprecedented change over the last few years as greater regulatory scrutiny has created the need for a fundamental shift in business and operating models. Firms are looking to cut costs, improve efficiencies, and leverage technology to create new, agile business models. One of the avenues that can help catalyze this strategy is by leveraging cloud solutions, offering reduced time to market, the ability to innovate, lower total cost of ownership (TCO), and pay-as-you-go commercial models. However, with increased regulatory scrutiny, there are some workloads that are more suitable to managing in the cloud than others. According to CEB TowerGroup, business functions most amenable to cloud migration include clearing and settlement, research, analytics, modeling, and pricing and valuation.
Risk and regulatory compliance are currently the highest priorities at the board level. Firms are now required to be proactive and take a more holistic view of risk. No longer are risk analytics only a departmental function aligned to trading desks—now, firms need to take into account risk at the bank level, and with increasing levels of automated trading, there is a need for more frequent assessment and valuation of the risks.
What are the key challenges that capital markets firms are facing in grid computing and associated risk management?
Rupesh Khendry, head of worldwide capital markets solutions, Microsoft: Risk management and related analytics functions need large amounts of computing power to deliver a competitive advantage by creating advanced modeling solutions to meet the business need for faster, more accurate projections and forecasts. This data analysis is typically achieved via complex mathematical models and simulations, repeated thousands of times to return results within restricted timeframes. With an infrastructure that includes thousands of physical CPUs, the resource requirements to complete these types of scenarios are extreme and cost-prohibitive. Financial services firms are increasingly looking at alternative options to tackle this compute need, including hybrid clouds, public clouds, and innovative hosting approaches. New regulatory requirements in the credit counterparty risk space are also pushing banks toward consolidating platforms to deal with cross-asset challenges like credit valuation adjustment (CVA).
Cloud computing is the most compelling option in terms of agility and scale to transform and monetize the business. Most large firms typically have internal computing grid capacity set aside, requiring significant capital to upgrade and maintain. However, they also often need additional computational capacity for peak use-periods such as during batch or intra-day computes, which, at other times, tend to lay idle. Therefore, the elastic nature of cloud computing provides an ideal solution for firms looking to reduce capital expenditure, while managing the needs of the business as efficiently as possible, allowing it to process larger amounts of data and do more complex analysis in reduced timeframes.
Why is this space ripe for disruption and innovation?
Khendry: Financial services firms are facing more acute cost pressures than at any time in the past. They are being forced to do more with fewer resources, while at the same time trying to manage down their fixed operating costs in an environment that continues to grow in terms of the regulatory burden. Most firms currently use siloed tools with a myriad infrastructure and applications to manage their risk and analytics needs, which increase complexity and risk. Microsoft and its partners present an innovative approach with an end-to-end solution from data sourcing and aggregation, to compute, analytics, visualization and consumption, delivering enhanced “time to value” for insights. All of this is delivered with the required high-performance compute power in a seamless and flexible manner with a compelling TCO.
A typical model harnessing Microsoft Azure can save up to approximately 40 percent compared with similar in-house deployed solutions. Not only are financial institutions considering this option from an efficiency standpoint, but there is increased interest in “risk-as-a-service” as a value-added offering to their institutional clients and as a new product that can be monetized for small and mid-sized businesses and other segments.
What is the Microsoft–Excelian value proposition to this market?
Nedelcoux: Microsoft is uniquely positioned to help financial services firms transform various aspects of their business by industrializing their grid computing requirements through leveraging Microsoft solutions. This initiative incorporates Microsoft’s Azure and High Performance Compute (HPC) solutions pack for solving large-scale grid computing and analytics challenges. Microsoft has partnered with Excelian to deliver solutions to financial services firms globally. Deployment options include:
- Leveraging cloud only for scheduled peak-time needs (while leveraging on-premises grids for regular compute needs).
- Leveraging cloud for unpredictable needs (where market changes influence a need for large capacity at relatively short notice).
- Leveraging cloud for a ground-up/parallel-grid requirement (as a de-linked operation that is fully on a cloud-based grid).
Liquidnet's Adam Sussman joins to discuss the Members Exchange: Why do we need another trading venue, what are the tech challenges, who will be the CEO?Subscribe to Weekly Wrap emails