AWS and its regulatory reporting monopoly – the drawbacks continue

Recently, FinanceFeeds explained how the monopolistic aspirations of Amazon and its peers are not a good thing for the democratization of the electronic trading industry, and even less of a good thing for keeping your brokerage’s intellectual property in the right hands.

Whilst many firms have realized that the infrastructural and trade reporting rules set out by many regulators, such as MiFID II in Europe, require extensive reporting via specialist regulatory technology companies and have been designed in order to keep regulation up to speed with the pace of technological change within electronic financial markets, the silent elephant in the room has been the vehicle by which trade execution and settlement is reported to competent authorities.

The reality is that this aspect – the aspect that involves transmission of confidential client and trade data – is handled by giant monopolies run by megalomaniacs such as Jeff Bezos and very soon, and very worryingly Chinese zealot Jack Ma.

Recently, FinanceFeeds pointed out that the regulatory authorities responsible for the last ten years worth of financial infrastructure rulings such as ESMA’s MiFID II directive which were intended to generate transparency and give brokerages a stringent set of reporting rules which would result in data being encrypted via specialist technology, known colloquially as ‘regtech’ – jargon for ‘regulatory technology’, and sent directly to trade repositories which are only accessible by government departments.

We therefore reiterate that transparency is absolutely not part of this equation.

Amazon Web Services (AWS) has a stranglehold over the transmission and reporting aspect of all retail OTC derivatives conformity to MiFID II’s directive, meaning that whenever a regulatory technology company sends its data to a reporting entity, it is giving its entire intellectual property to Amazon.

I have it very good authority from many insiders in the regtech sector that AWS is so intrenched in the infrastructure that all regtech providers have no choice other than to use AWS for cloud based reporting.

Ergo, AWS owns and has full access to all trade, client, reporting and commercial data of every derivatives firm that reports to ESMA, ASIC, and various other regulatory bodies.

And this is without even touching on Jack Ma’s ANT company which has aspirations of growing out of Communist China by listing on the Shanghai Stock Exchange, therefore establishing internationally with public shareholders all over the world. ensuring that all data goes back to China. No thank you very much.

To recap, just after FinanceFeeds highlighted this monopolistic scourge ANT, the Chinese newcomer founded by Alibaba magnate Jack Ma looked toward setting a record IPO value for such an entity of $34 billion, and in doing so steps out of the iron curtain environment of China into the global corporate mould, AWS is onboarding even more platforms.

And who is behind this sudden upstart that is now looking to dominate the world? Jack Ma, of Alibaba. In other words, the Chinese government and one of the internet’s most controlling figures.

Thankfully, this has since fallen on its sword, as ironically, the communist government has thwarted these IPO plans, but one can rest assured, Mr Ma will find a way of complying with the government and will soon be back out there waging this intellectual property proxy war on every electronic trading firm globally. As if the government doesn’t get influenced by Mr Ma. He one of the mightiest wielders of the hammer and sickle.

Today, two data privacy experts, Colin Constable, CTO of data privacy and new internet protocol, The @ Company, and his colleague, Kevin Nickels, CPO,  spoke to FinanceFeeds with regard to this matter.

Mr Constable said “Amazon works as a flywheel, getting more and more powerful by offering independents access to its enormous network. An unfortunate outcome of this and other companies like them that enable access to their network of services is that they start tracking these businesses. The implication is that while initially, these services enable small businesses, these companies pay a data tax for being too successful. It’s a data fiefdom of sorts. We applaud the European Union for taking a first step toward breaking the flywheel and freeing small businesses from this damaging long-term outcome.”

Mr Nickels explained “We expect these large platforms to continue to be under pressure on a number of fronts as a result of the negative aspects of their business models and data practices. This is healthy and a good thing and a number of responses will emerge. The @ Company is meanwhile busy trying to provide fundamental technology solutions that will be instrumental to address this in addition to regulatory actions.”

Perhaps so much effort was placed upon the radical changes required within all types of listed and OTC derivatives entity in the run up to the regulatory and infrastructural changes required by most competent authorities over recent years that the risk of placing all data in the hands of once global monopolist which by its nature is a data harvester and reseller was never considered.

Making all trade and client investment and behavioral detail channel through AWS is akin to moving the deck chairs around on the Titanic.

Yes, brokers, exchanges, trading venues and marketplaces are now under the strict auspices of the authorities whose data is completely visible, but when it is AWS that is the linchpin, one has to wonder how just one provider has become the default and why AWS went to great lengths to make itself the global underpinning for trade reporting and data transmission.

Why not industry specific hosting and points of presence experts such as Radianz, Equinix or TMX Atrium? Why a generic internet marketplace which has sole interest in owning the entire world’s e-commerce data? I think we know why.