Cloud computing is changing the world for sophisticated
institutional investors even those who have never used
Internet-based servers to execute a trade or stress-tested a
high-frequency trading strategy. The result, according to
experts, will be a lower cost structure for performing high-end
trades and more widespread access to the computing power needed
to develop and execute complex algorithmic trading
Cloud computing on-demand self-service Internet
infrastructure where you pay-as-you-go and use only what you
need is growing fast. Revenues in 2009 topped $56
billion for a 20 percent-plus increase from the previous year,
according to technology research firm Gartner Inc., which
projects the market hitting $150.1 billion in 2013.
What makes computing in the cloud so attractive
to institutional investors is that it enables an end user to
rent computing time from organizations with huge
server capacity, such as Google, IBM, Salesforce.com, Savvis,
Microsofts Windows Azure, Amazon Elastic Compute Cloud
(Amazon EC2), and Rackspace Cloud.
Firms now have a choice. They can build and maintain their
own data centers, which can cost $1 million even if they
cover only two or three markets, estimates Ken Yeadon, managing
partner of Thematic Capital Partners
LLP, a London-based venture capital firm that specializes
in trading infrastructure. Or they can use cloud
providers servers to test new trading strategies, back
test and run time series analyses, and even execute trades.
High-frequency trading strategies start with a lot of
data analysis and often have a long R&D cycle, notes
Yeadon. This can involve very expensive computational
processes. You might need 1,000 CPUs working together in
conjunction as a supercomputer for a short period of time. With
cloud computing, instead of building the data center
infrastructure yourself, you can test the strategy as long as
you need to, on demand, and if it doesn't stack up, you just
shut it down and stop paying for it. These types of strategy
would simply not be commercially viable otherwise for anyone
except the very largest market participants.
Providers like Amazon EC2 tend to charge
the user only for the time and capacity used, rather than
passing on a percentage of their total costs including
maintenance, troubleshooting, security and other capabilities.
For instance, the hourly charge to use one Rackspace server
with a 620GB disk powering 8,192MB of RAM costs $0.96 per hour,
or $700.80 per month along with two basic charges of
$100 a month and $0.12 charge per server hour.