In 2022, cloud shows true potential to displace legacy data platforms

A decade ago, if you had said that the companies driving innovation in capital markets data platforms would be the likes of Amazon (that online bookstore?), Google (the search engine?) and Microsoft (home of the annoying talking paperclip), then go out and buy yourself a lottery ticket—you’re either lucky or smart enough to win the jackpot.

As these tech giants have evolved from their original businesses into hosting huge cloud computing environments, they’ve become the partners of choice for organizations across the capital markets—from exchanges to technology vendors to banks and asset managers—looking to offload their expensive, in-house hardware footprints to the cloud, theoretically creating elastic scalability at a fraction of the cost of running their own datacenters. And as these companies gradually pry firms away from their on-site infrastructure, application-by-application, market data has proved one of the tougher nuts to crack. But market data platform providers seeking to exploit cloud’s advantages are enlisting big tech to help them modernize their offerings and respond to client demand for cloud-enabled technologies.

As the big tech providers compete for potential clients, Microsoft scored this year’s knockout blow, closing out the year with a deal to move the London Stock Exchange Group’s—and its Refinitiv data vendor acquisition’s—data infrastructure to Microsoft’s Azure cloud, accelerating the exchange’s plans to migrate to the cloud. The deal is worth a minimum of $2.8 billion to the software and cloud giant over the 10-year term of the partnership.

The agreement initially covers LSEG’s Data & Analytics business: Its data platform “and other key technology infrastructure” will migrate to Microsoft’s Azure cloud over an undisclosed timeframe; Refinitiv’s Workspace display will become interoperable with other Microsoft applications; and the two will introduce new cloud-based data analytics services. It also includes an agreement to explore developing a cloud-based digital market infrastructure, though the parties warn that migration of any regulated applications will be subject to approval where required.

LSEG will leverage Microsoft’s Purview data governance platform and its Azure Synapse Analytics data integration, warehousing and big data analytics service, and will use Azure machine learning to develop new, as-yet undisclosed solutions that the parties say will give financial firms “much broader reach across sophisticated cross-asset, sustainable investment-aligned and non-traditional analytics.” In addition, the integration with Workspace will provide a data and analytics solution with collaboration tools from Microsoft 365 and Microsoft Teams, and with Excel spreadsheet modeling built in.

Also, as part of the deal, Microsoft will buy a 4% equity stake in the exchange group.

The deal is reminiscent of Google’s similar partnership with CME Group, announced last November, where the vendor invested $1 billion in the exchange in a 10-year deal that would see CME migrate its technology to Google Cloud, starting with data and clearing services, then ultimately shift all its markets into the cloud. Officials said the move would enable the exchange to expand access to its derivatives markets, promote more resilient markets, and create innovative real-time data and analytics products and services more quickly.

Yet even while LSEG and Refinitiv are making strides toward cloud environments, Refinitiv is pursuing parallel tracks, also investing in its direct feeds architecture with the acquisition of low-latency feed handler vendor MayStreet earlier this year. Refinitiv had in recent years chosen to license MayStreet’s Bellport feed handlers rather than build its own, and as a result of the acquisition can now offer single-digit microsecond latency access to datafeeds from more than 200 trading venues, officials say.

So, in theory, LSEG and Refinitiv will be able to serve a broader range of customers with right-sized solutions, ranging from low-latency feeds for the most demanding high-frequency traders to cloud-based access to data for those who don’t have that same level of latency sensitivity, or who may be looking to migrate away from heavy, in-house data infrastructures toward cloud-based data platforms and API access.

For example, Refinitiv is involved in its own project to port its Real Time Distribution System (RTDS) to the cloud. For the past two decades, previous iterations of the platform—previously known as the Reuters Market Data System (RMDS) then as the Thomson Reuters Enterprise Platform (Trep) under Thomson Reuters ownership—have been the data distribution platform of choice for firms managing large requirements for market data in their organizations to feed every use case from desktop workstations to trading algorithms and risk systems.

Refinitiv’s strategy is being driven by client demand as more firms start moving not just storage functions and processing onto cloud resources, but also attempt to migrate real-time data traffic and consuming apps to run in the cloud. At industry association FISD’s World Financial Information Conference in Prague in October, executives from Goldman Sachs and JP Morgan described their efforts to create a group that would share expertise and experience to help solve some of the problems of running real-time data in the cloud.

But in some ways, the year’s biggest news came from Refinitiv’s chief rival Bloomberg, which also spent the year focusing on making data available in the cloud, via a partnership with Google. In March, the vendor announced that its real-time B-Pipe datafeed was available via Google Cloud, offering managed access to data on 35 million instruments from more than 330 exchanges via Bloomberg’s Open API.

Officials said the move would enable financial firms to more rapidly deploy data applications with lower cost of ownership and without needing to install and manage additional hardware or software. Then in October, the vendor announced that all data available via its Data License service—such as pricing, reference data, corporate actions, ESG data, historical data and research—would also be accessible via Google Cloud.

This ability to access Bloomberg content not only outside of the vendor’s Bloomberg Professional terminal, but in a way that it can be easily integrated with cloud-based applications and workflows being developed by financial firms rather than using legacy and hard-to-displace on-site architectures may play a key role in defining what the data platforms of the future will look like—probably more like flexible and open grids and data meshes rather than rigid, proprietary platforms.

Finally, the cloud may offer firms the ability to do what they’ve been attempting for years—to combine datasets from different vendors in a true plug-and-play environment. But just because something is technically possible doesn’t mean it will take off—for that to happen, vendors and exchanges need to win over not just technologists, but also procurement and finance professionals who set firms’ budgets. If they can match their technical innovation with equally innovative approaches to commercial terms, then cloud could quickly supplant traditional data delivery methods as a more economical and ergonomical option.