New Jersey could soon lose some of its most notorious residents. The Garden State houses data centers where most US equity trading takes place, leading Wall Street firms to buy up space and implement cutting-edge technology in the region.
But Nasdaq CEO Adena Friedman said that moving exchanges out of these facilities and into the cloud is a key part of how she sees the financial industry evolving over the next decade.
"Every exchange system, for the most part, is on-premise, sits in a data center, and becomes a very bespoke offering by each exchange," Friedman said at an industry conference last week. "And then you have an ecosystem that sits within the data center as well. If you lift that into the cloud, then you have an opportunity to look at it on a more broad basis in terms of it being a platform for transactions that occur across the world."
Friedman's vision is part of a larger trend she sees of moving the technology that powers the financial markets into the cloud.
Wall Street has spent years becoming more comfortable with cloud computing capabilities, or using remote servers that can increase processing power at will as opposed to buying and physically maintaining hardware. More recently, financial firms have begun using public clouds — managed by technology giants like Amazon, Google, or Microsoft — which were long considered too risky by some in the industry.
Friedman said a big benefit of moving to the cloud is the ability to leverage more data. Wall Street firms have developed a strong appetite for alternative data, spending billions of dollars a year on nontraditional data sets they think will give them a trading edge. In the existing setup, firms are restricted by using only data in the exchange's own ecosystem, Friedman said.
"I think with all of the infrastructure going to the cloud and all of the data coming in and being able to interact with that infrastructure, you have the opportunity to use a whole range of information to drive investor decisions," Friedman said.
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