I recently had the pleasure of taking part in a panel discussion on exchange hosting and connectivity options at the Association of Futures Markets (AFM) conference in Budapest. Together with my fellow panellists from other technology firms and exchanges, we had a good conversation about the practical issues around how exchanges implement their operational systems. In this post, I’ll share a summary of my contributions to the panel, focusing on key topics such as software resilience, data protection, scalability, and the advantages of cloud versus on-premises solutions, all things that we at Sinara deal with when building and deploying solutions for our exchange customers.
Software Resilience and Recovery
When it comes to exchanges, software resilience is of huge importance. Traders rely on these systems to operate smoothly, and any disruption can lead to uncertainty and losses. To ensure uninterrupted trading, it is essential for exchanges to implement resilient systems that minimise downtime and swiftly recover from any component failures. Ideally, the goal is for trading members to not even realise when a software component restarts. Robust failover mechanisms and redundancy in critical components can help achieve this level of reliability, but this needs to be designed in from the start.
Audit Trails and Backups
Maintaining comprehensive audit trails and backups is a vital aspect of exchange operation. These historical records play a crucial role in compliance, risk management, and investigations. By securely storing and managing transaction data, exchanges can demonstrate transparency, facilitate regulatory requirements, and gain insights for future decision-making, potentially even creating new value-add solutions using the data.
Data Protection and Security against Cyberattacks
With cyber threats becoming increasingly sophisticated, safeguarding sensitive data has never been more critical. Exchanges must implement robust security measures to protect data both “in motion” and “at rest,” using advanced encryption, secure communication channels, and regular vulnerability assessments to help mitigate the risk of data breaches. Additionally, constant monitoring, intrusion detection systems, and proactive incident response strategies are essential for maintaining a secure trading environment.
The ability to quickly scale systems is vital for exchanges, especially during periods of high trading activity, so key components such as trading engines and interfaces must be designed to handle increased loads seamlessly. By implementing elastic scaling mechanisms, exchanges can ensure their systems adapt to varying demand, avoiding bottlenecks and latency issues. Cloud solutions are particularly well-suited to achieving these goals, but the trading systems themselves must be designed to be able to really take advantage of that environment and deliver the scalability needed.
Latency and Multiple Hosted Locations
In today’s high-speed trading landscape, latency can significantly impact competitiveness. Therefore, exchanges must strive to minimise latency wherever possible. Hosting exchange infrastructure in multiple geographical locations helps reduce the physical distance between traders and the exchange, resulting in faster data transmission. Using intelligent order routing and high-speed interconnectivity, exchanges can optimise performance and provide low-latency trading experiences to participants in key markets around the world.
Using the Cloud for Test Environments
The cloud offers huge flexibility when it comes to hosting different environments, such as for user acceptance testing (UAT). Cloud-based solutions allow exchanges to quickly spin up and shut down test environments as needed, reducing infrastructure costs. By leveraging the scalability and cost-effectiveness of the cloud, exchanges can optimise resources and streamline their testing processes, ultimately leading to faster software deployment.
Timely Fixing and Deployment of Systems
In a fast-paced trading environment, the ability to address issues promptly and deploy fixes in a timely manner is crucial. By implementing efficient release management processes, exchanges can minimise the time required to deploy fixes or enhancements. This agility ensures that critical systems can be updated promptly, without compromising the stability and reliability of the overall trading platform.
Choosing Between Cloud and On-Premises Solutions
When deciding between a cloud or on-premises deployment for hosting exchange operational systems, several factors must be considered. While the cloud offers flexibility, scalability, and ease of deployment for new exchanges (or launching new services in a more established exchange), it is essential to carefully evaluate the costs. The most appropriate cloud processing and data storage services need to be purchased and it’s worth repeating that software needs to be highly optimised to actually make the most out of this environment. In many cases, simply moving existing software to the cloud will provide little immediate gain unless the old infrastructure had cost or performance degradation issues.
In summary, exchanges must continuously adapt, ensuring software resilience, data protection, scalability, and the ability to leverage the cloud’s benefits. Working with trusted technology partners like Sinara who prioritise these factors in delivering new systems, exchanges can establish secure, efficient, and competitive trading environments that truly empower market participants.