Wall Street Not Bullish on Cloud

Financial firms are trying cloud computing, but execs remain wary that key data could be exposed.

Wall street firms have been slow to take full advantage of the potential financial and resource savings available through cloud computing because they have security and regulatory concerns, say IT executives.

For example, while Nasdaq OMX Group Inc. uses cloud computing systems within its firewall to access historical market data, IT executives there aren't yet confident that transactional data would be adequately protected in the cloud, said Nasdaq Chief Technology Officer Mats Andersson at the High Performance Computing Financial Markets conference last week in New York.

Dan Hall, manager of systems design and engineering at IntercontinentalExchange Inc., said the online commodities exchange is running Amazon.com's S3 cloud computing service only in a test environment, primarily because officials have concerns about security. "We only use it once in a while for load testing," he said.

Deutsche Bank AG has been using a hybrid private-public cloud computing infrastructure for testing and development for 18 months or so.

The limited usage has put internal critics of the technology at ease, said Tony Pizi, head of the financial services firm's next-generation infrastructure group.

Pizi noted that top executives at Deutsche Bank have been very open-minded about cloud and its benefits, but they also recognize the challenges the technology can present to large companies.

Richard Sharp, a partner in the law firm Milbank, Tweed, Hadley & McCloy LLP in New York and former head of trading practices at the U.S. Securities and Exchange Commission, warned financial services IT executives to be especially wary of regulatory requirements when considering whether to turn to cloud computing. For example, Sharp said, regulators today are applying rules based on their view that cloud computing is an outsourced service.

"The first thing regulators are going to say is, 'You're going to give up control of your IT infrastructure? We need to talk,' " he said.

In recent months, Sharp added, the SEC and the Financial Industry Regulatory Agency (FINRA) have appeared to be close to taking a position that broker-dealers can't move funds and securities through the cloud. "These are viewed as off-limits," he said. "So there's a very active debate going on, and new rules are expected shortly from FINRA that will regulate cloud computing."

Nonetheless, Pizi has high long-term hopes that use of cloud computing will spread among Wall Street firms. The technology could one day be a "game-changer," he said, adding, "I don't think anyone thinks the Internet didn't fundamentally change the world. This is of the same magnitude."

This version of this story was originally published in Computerworld's print edition. It was adapted from an article that appeared earlier on Computerworld.com.

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