Last year, when the Reserve Bank of India (RBI) raised concerns regarding the possibility of growing systemic risk for the entire financial markets due to high frequency trading (HFT), the opinion was based on insights received from data. The regulator observed that over 90% of the orders placed in equity, currency, and other markets through algorithms were actually cancelled within less than a minute.
The objective of such orders was to manipulate market price for favourable trading outcomes. As the Indian financial markets aspire to become more transparent, liquid, inclusive, and at par with global peers; sophisticated data analytics for market surveillance will play a key role to reduce the risk of market abuse and insider trading. Regulators will continue to face challenges in balancing demands for financial market innovations to enhance market liquidity and the impact of such innovations on financial stability. The amount of data to analyse can be mind boggling considering trading activity in multiple trading venues across multiple asset classes by different financial intermediaries, institutional and retail investors.
Compute intensive analytics workloads for processing large volume of data is a great use case for the public cloud. Businesses can quickly provision and scale compute clusters to process large volume of data in batch or in real time. Earlier in May 2006, Bombay Stock Exchange (BSE) announced its algorithm trading test environment on AWS cloud. Members will be able to test their trading strategies with live market data feed during market hours and historical market data. If the same exercise is done without access to cloud computing, it may not have been a viable offering given the infrastructure costs to deploy and maintain such a system on premise.
On premise big data analytics deployments entails considerable operational risks to maintain complex infrastructure requiring hard to find highly trained professionals. The requirements to deploy and operate such systems in-house is daunting even for large BFSI players still learning to ride the digital transformation wave.
Vertical cloud solutions like SaaS (software as a service) thrives in highly regulated industries such as financial services. Few years back, National Bank for Agriculture and Rural Development (NABARD) led one of the biggest IT transformations in the Indian banking industry by enabling banking operations of 201 state and district co-operative banks move to a single cloud-based core banking solutions. This empowered country’s rural customers to access basic banking facilities such any branch banking, SMS notifications, NEFT, RTGS and access to ATMs.
The adoption of cloud computing has been steadily picking up in the Indian financial markets. Back in November 2014, Microsoft reported that ICICI Lombard migrated its test and development environment for 17 key applications to Microsoft Azure. Fast forward to May 2016, Microsoft India claimed that 50 of the top 100 companies listed on Bombay Stock Exchange (BSE) have adopted the Microsoft cloud infrastructure, within the first six months of its launch in India! The list includes well-known names from BFSI industry such as HDFC Bank, ICICI Lombard, IDFC, and Kotak Mahindra Bank.
In the past, the regulatory concerns about storing the sensitive financial data on global data centres outside India has discouraged adoption of public cloud. According to a CII report titled “Boosting Market Dynamics with Digital Technologies” released during the CII national cloud summit in May, 2016, 57% of financial services organizations surveyed have indicated that they have implemented cloud based services in some shape or form.
However, only 14% of survey respondents have adopted the public cloud. Nevertheless, it is worth noting that over the last year global cloud providers like Microsoft and IBM have launched local cloud data centres in India. Amazon is in the process of establishing cloud data centre in India by 2016. Indian BFSI companies can now leverage local cloud services from global cloud leaders to architect highly resilient systems without having to compromise on security, risk and regulatory requirements.
Evolving regulatory landscape, increasing competition, changing customer expectations and rise of Fintech startups is disrupting the global capital markets. Today, Indian BFSI is more integrated with the global markets than ever before. Timely insights from market and customer data is critical to respond to changing global and local market conditions as well as evolving customer expectations. Challenges range from gathering and analysing large volume of data from multiple sources which not only come in variety of formats but is often time sensitive requiring prompt action.
Moreover, data infrastructure needs to continuously evolve as business leaders seek answers to new questions. To remain competitive, BFSI companies need to be agile while reducing capital expenditure as well as operations costs. Cloud computing can well be the secret sauce for the cash starved Indian BFSI to increase their footprint within the country and globally by helping them launch innovative, yet cost effective products and services for the digital economy which can scale with growing customer base!
The author is Senior Specialist, Sapient Global Markets.
Published Date: Jun 29, 2016 10:31 am | Updated Date: Jun 29, 2016 10:31 am