Opening Cross: Everything Comes at a Cost, Even Cloud

However, over the past few lean years, one of the main drivers of any meager spend increases has been regulatory compliance—an area of spend that firms are reluctant to swallow because it is not something that offers any monetary return on their investment, unless you count avoiding non-compliance fines. So, many firms are looking to cloud computing to deliver cost savings around these initiatives as the “least bad” option to reduce a cost burden that didn’t exist until recently.

And with its FinQloud capital markets-dedicated cloud offering—based on Amazon Web Services’ cloud—Nasdaq has done much to bring cloud computing to a financial community that traditionally eyes new technologies with suspicion, especially those originating outside the financial sphere. However, the exchange recently sent notices to clients announcing that it will stop re-selling AWS services, and will discontinue support for its R3 regulatory archiving and retrieval service.

Nasdaq didn’t respond to questions about what remains of FinQloud or why it chose to axe parts of the service, but almost certainly the decision comes down to cost in one way or another. Perhaps part of the problem was the cost level at which Nasdaq was offering the service. Everyone knows the claims about cloud: For example, US regulator FINRA expects to save 40 percent by migrating its market surveillance platforms to the cloud (IMD, May 26). However, FinQloud was aiming even higher, claiming to offer R3 for 80 percent less than non-cloud solutions.

With ongoing belt-tightening, all levels in financial firms are becoming more conscious of costs, as noted in a new survey from economic and benchmark data provider Rimes Technologies that reveals end users are concerned about their index and benchmark data costs, while management functions are more concerned about centralization. Ironically, while everyone wants the same result, going about it in different ways makes effective market data management harder.

Surely with this in mind, consultancy DataContent has begun offering a data governance service that helps firms measure “return on data investment” by creating processes to organize, manage and acquire data by outlining principles that can be replicated across firms and adapted to specific workflows, then codified into management systems by partner Global IDs. Keiren Harris, Hong Kong-based principal at DataContent, says implementing proper processes allows data professionals to bring business users into the data management discussion, instead of merely presenting them with fait accomplis edicts about data usage.

“Users of data may not care about data licensing—but, they may never have been given the data licenses to check,” he says.

Of course, end users are not often associated with being conscious of data costs, as any data manager who’s tried to take away a trader’s Bloomberg terminal and migrate them to cheaper alternatives will know. However, I suspect the knee-jerk headcount cuts that accompanied the onset of the financial crisis, and the ongoing budget tightening has left even traders wary of how much they spend. After all, as new tools—such as the workflow processes developed by DataContent and codified by Global IDs—enable data professionals to analyze the cost-versus-benefit of data spend at ever-more granular levels, individual traders’ costs are coming under greater scrutiny than ever before. So if it’s harder for traders to make the same profits they used to, it makes perfect sense that they would want to take a closer look at their own expenditure and reduce their costs to preserve their profitability—before someone else does.