While technology will undoubtedly continue to alter how investments, trading and financial markets are conducted, the future landscape is convoluted, with a myriad of innovations impacting products, services and operations. Here, we look at the next wave of technologies that no doubt will have a profound impact on the future of the infrastructure of financial markets, from the way markets are conducted to the increased functionality and services market participants will get from exchanges. So what will that look like?

This has the effect of improving market transparency, efficiency and most importantly, lowering the cost of both capital and transacting, which is key to maintaining an attractive marketplace. It is how some crypto exchanges operate today, where transactions are facilitated peer-to-peer without an obvious intermediary. While those exchanges don’t benefit from high levels of regulatory oversight and investor protection that traditional exchanges provide, they offer unique lessons for global market operators on how technology can benefit all market stakeholders.

“One of the most innovative aspects of crypto technology is real-time alignment through smart contract capabilities between various constituents. Traditional technologies can, of course, let everyone learn about a particular event – let’s say a dividend announcement – at the same time, but what is ultimately underpinning decentralised finance and its relevance for exchanges is the subsequent ability to codify how everybody responds to and processes that event in a synchronised way across the whole market,” adds John.

The adoption of cloud will also gain momentum – and move closer to core infrastructure.

“With exchanges, we are seeing more adoption of cloud computing – and its use is becoming closer and closer to core infrastructure,” explains Richard. There are clear advantages to operating on-demand. For one, it allows for greater flexibility and deployment agility. For example, if exchanges want to test a new system, they can build the test environment more easily and cost-effectively with a cloud provider and close it down once they’re done with it.

“So the cloud gives you a much more flexible and nimble infrastructure than an on-premise solution. And critically, having that flexibility allows you to move super quickly to align with the evolving needs of your clients,” adds Richard.

That said, it is not all straightforward. Use of the cloud does present unique challenges – such as the potential for inconsistent latencies in the delivery of services depending on where clients are in relation to the location of the cloud engine. This could give an advantage to one client in one location relative to another, which could cause problems in the fast-paced environment of financial markets. But this doesn’t mean that technology can’t resolve this problem overtime – it’s a question of “when”, not “if”.

“While some peripheral services already run on the cloud, critical market infrastructure hasn’t got there yet. But it doesn’t mean that we won’t get there.  When we talk to cloud providers, they are absolutely focused on finding solutions to allow for core market infrastructure to be migrated – and we can see that it is going to be a key partnership for us,” adds Richard.

While some peripheral services already run on the cloud, critical market infrastructure hasn’t got there yet. But it doesn’t mean that we won’t get there.  When we talk to cloud providers, they are absolutely focused on finding solutions to allow for core market infrastructure to be migrated – and we can see that it is going to be a key partnership for us.

   Chief Technology Officer, Richard Leung