Retail FX brokers have become increasingly comfortable distributing liquidity to their clients via the cloud. However, once that liquidity is taken or distributed to or from the more institutional inter-dealer market, those venues are typically hosting and/or trading on co-location – physical, on-premise – infrastructure rather than cloud virtualised infrastructure.
Partnerships between exchanges and the major cloud providers may be more relevant to listed securities than over-the-counter (OTC) FX pairs to date. However, they will set a pattern for the rest of the industry as it starts to think about the inevitability of those very high frequency, low-latency trading venues running in the public cloud.
Many FX firms will favour hybrid cloud setups that safeguard intellectual property, leveraging cloud scalability for non-core activities
“The implications for the FX market are obvious,” says Matt Barrett, co-founder and CEO of trading technology and consultancy firm Adaptive. “Low latency, reliable connectivity between liquidity venues is relatively expensive as traders have to sign contracts with co-location and telecoms providers, buy hardware that has to be located in the co-location venue and connect everything together.
