Instead of keeping trading and other information in their own data centers, brokers will be able to put it on servers run by Amazon, according to executives from the companies. Access and encryption will be provided by Nasdaq OMX, according to Eric Noll, executive vice president for transaction services at the New York-based exchange operator.
For Amazon, the plan is a way to add financial customers for the data storage and other cloud computing services it offers to clients such as the National Aeronautics Space Administration, Netflix Inc. and hundreds of thousands of businesses. Nasdaq OMX has sought to expand sales sources as profits from stock trading shrink.
Information management is “expensive, it’s unwieldy, it takes a lot of resources within the companies,” Noll said. “We can offer significant cost savings for data storage and data retrieval over the long term and help them reduce their operating costs significantly.”
Cloud computing uses a shared pool of remote servers to store data and run applications. Seattle-based Amazon generated $800 million in sales from the services in 2011, up from $300 million in 2010, according to estimates from Goldman Sachs Group Inc.
Selling technology services has helped Nasdaq offset declines in sales from trading. The New York-based company’s revenue excluding rebates, clearing and other fees rose 2.2 percent to $424 million in the second quarter, exceeding the average analyst projection, data compiled by Bloomberg show.
Access and broker services revenue increased the most, rising 12 percent to $66 million from a year earlier. Market data, which accounted for 22 percent of net revenue, gained 8.4 percent to $90 million, Nasdaq said. Fees for handling stock transactions fell 12 percent to $52 million and derivatives trading and clearing slipped 6.7 percent to $70 million.
U.S. brokers will be able to store order and transaction data and maintain their books and records in the companies’ FinQloud initiative, Noll said in an interview. Amazon Web Services will provide the technology infrastructure and manage the data centers, according to Andy Jassy, senior vice president of Amazon Web Services.
Brokers using the service will pay per-gigabyte fees based on the amount of information they store, Noll said. Any data, not just Nasdaq-related equities or options trading information, can be housed on Amazon’s facilities, he said.
The initiative will help financial companies save money because they can pay for only the capacity they use, Jassy said.
Additional services, such as risk management after trades occur, may be offered through FinQloud, Noll said. The offering is also likely to be extended outside the U.S., he said. Nasdaq technology is used in about 70 exchanges globally, Noll said.
The exchange operator also plans to use the service for its own so-called routing broker, which it employs to send orders to other U.S. markets, Noll said. Keeping the data it must store in the cloud will reduce Nasdaq OMX’s operating costs, he said.
The data storage and retrieval initiative may help facilitate the so-called consolidated audit trail, the record of all orders and transactions generated in U.S. securities that the exchanges and Financial Industry Regulatory Authority are developing, Noll said.
“Amazon’s expertise is in cloud computing and data storage,” Noll said. “We bring our regulatory insights, encryption and the relationship with the broker-dealer community.” He added that the growing volume of trading data that brokers must store “isn’t going away.”
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