Do you really want a trade data and reporting monopoly led by Jeff Bezos? No? Thought not.
What do brokers think of the AWS monopoly on trade reporting? Do you want the entire dataset for the entire FX industry owned by Amazon, or even worse, the Chinese government?
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.
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.
That, whichever way you look at it, is a monopoly, and a problematic one at that. Amazon, like all the large internet companies, is a data company. It is similar to Google, Alibaba, Facebook and eBay in its collaboration with big government and influence over the world’s markets and political leaders due to its harvesting of mass data and very detailed knowledge on how to assemble it.
Last week, just after FinanceFeeds highlighted this monopolistic scourge ANT, the Chinese newcomer founded by Alibaba magnate Jack Ma looks 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.
Just that same day, Itiviti, a technology and service provider to financial institutions worldwide, today announced the cloud transformation of its entire electronic trading platform. Itiviti opted for a hybrid private-public cloud strategy to reinforce the modularity and flexibility of the Itiviti platform.
To operate the transformation, the company stated that it will collaborate with data center experts Data Canopy and technology and supply chain services specialist Ingram Micro, and leverage Amazon Web Services.
It is highly likely that in the future, we will all be using ANT for various components of electronic trading, be that reporting, back office, client interaction and connectivity to service providers.
AWS already has done this by sidling up to regulators so that all regulatory reports have to be submitted via Amazon’s AWS cloud solution, thus if a broker takes regulatory reporting services from a specialist regulatory technology firm, reporting to regulators will by default be done via AWS. A clever move, however the battle between Amazon and Alibaba, both odious entities in my opinion, is hot to the point where Mr Ma will want total control.
This has been going unnoticed for some time, and nobody is questioning it. If it was one of the industry specific service providers, there would be litigation, but everyone is Amazon’s servant these days, and nobody will point out the elephant in the room in case they’re cut off, which is another by-product of monopolistic behavior.
Three years ago, Equinix, one of two hosting and infrastructure providers for trade and order routing, connectivity between venues and dedicated market integration, co-location, and owner of the world’s default locations for hosting for all financial markets activity in London, Hong Kong, Tokyo and New York was subjected to a lawsuit by TradeStream who alleged that Equinix misused its alleged monopoly in low latency access and co-location to major trading destinations.
At that time, TradeStream claimed that unless one uses Equinix’s services, there is no other low latency access available to the NASDAQ Exchange, Boston Stock Exchange, Philadelphia Stock Exchange , International Securities Exchange Holdings, Inc., BATS Trading, EDGA Exchange and EDGX Exchange, the Chicago Board Options Exchange or the Miami Stock Exchange for stocks and options.
Equinix access to these markets is estimated to account for about 85% of the daily options volume and about 66% of the exchange-listed stock volume.
Except for the New York Stock Exchange equities and options, TradeStream asserted that Equinix actually controls 100% low-latency access to all stock and options markets. Also, Equinix is alleged to control 100% of low latency access to non-exchange trading destinations.
TradeStream also said that Equinix maintains a monopoly over low latency access and co-location to major trading destinations.
What’s the difference?
The difference is that AWS is so global and has everyone on board to the point that going against them would finish your business as you’d be ostracized and have nowhere else to go, and if that isn’t the absolute definition of a monopoly, what is?
We asked Denis Peganov, Business Development Director at FXOpen, a company which has reporting offices in various global locations, what his perspective on this was.
Mr Peganov said “Transparency, fairness and peace of mind of the traders are always our key priorities – and this is what reporting trades to the regulators gives to the clients. At this point we do not think that many of traders will be concerned by the fact that their trades are uploaded to a single cloud. However, it is good for a broker to give traders a choice in case they don’t want their positions to be reported – for example, to trade with an offshore entity of a reputable broker.”
Indeed it is.