SSET eBook Finance WEB

ssetelecoms.com 0345 070 1997 [email protected]

eBook 2

Investment banking megatrends.Networking insights and options.

Four investment banking megatrends:

1. Customers are demanding more2. The trading floor is trading faster3. IT is getting smarter4. Compliance is getting harder

What you will learn from this eBook

The first eBook in this series examined four megatrends that are reshaping the business environment in the investment banking sector. This eBook will take a look at each megatrend from a networking and connectivity perspective, offering insights and options on how best to approach each one.

The information we impart in this eBook will help you recognise the opportunities the four megatrends have created and to devise appropriate connectivity strategies to deal with them.

http://www.ssetelecoms.com/infographic/investment-banking/


eBook 2 of 2Investment banking megatrends 2

David Adams is a freelance business and IT journalist. A former editor of Financial Sector Technology magazine (now FSTech), he has been writing about IT and the financial services industry since 1998, for a range of business and IT magazines. He trained as a journalist after a brief and utterly undistinguished spell as an insurance salesman.

Simon Poole leads the enterprise market development team at SSE Enterprise Telecoms and has more than 20 years of proven experience helping financial services firms get the best from their telecoms networks. Having worked with some of the world’s top investment banks, Simon understands the challenges facing the financial services industry and was a big contributor to this eBook.

About the authors

Advances in technology have helped transform the sector into perhaps THE most dynamic of market environments. Traders, dealers, bankers, brokers, fund managers, hedge funds and information providers all need IT and telecommunications infrastructure that can address the challenges that these megatrends create.

Who should read this eBook?This eBook is written for professionals that design, specify, buy, commission or support IT and networking services for firms in the investment banking sector.

Networking insights and options.



SSE Enterprise Telecoms specialise in the provision of high bandwidth, high availability network connectivity services within and between the buildings of the most demanding organisations across the UK. Our philosophy is based upon delivering services that offer seven key qualities in proportions engineered to meet each customer’s specific needs. We believe that these qualities are ideally suited to the needs of investment banking firms.

The following megatrends describe in some detail how we satisfy each of these seven qualities with our network services. We’d love to talk them through in more detail.

Accessible

Investment banking firms need to facilitate, quickly and easily, direct market access requirements: enabling access to exchanges, third party trading platforms and its own trading facilities. Private customers must feature largely in the thinking here too, remembering that Internet connected users require any-time, multi device access to your services.

Dependable

Service providing access must offer unmatched reliability, with additional layers of resilience that are valuable from a compliance perspective, reducing regulatory requirements for capital adequacy as well as safeguarding the company’s reputation.

Affordable

Naturally, firms will be seeking to invest in technology in a financially efficient way – those investments need to be affordable and economically sustainable.

Available

Systems and services must be readily available and rapidly deployable, minimising lost opportunity income that might be created by long lead-time delays.

Scalable

The services procured must offer scalability without incurring unreasonable over-provisioning costs, and be capable of managing wildly fluctuating and unpredictable customer trading demand.

Secure

Security is, of course, of paramount importance, for social responsibility, legal, reputational and regulatory reasons, as well as practical and operational ones.

Responsive

Our platforms must deliver responsive services that offer a consistently high level of customer and user experience. Without this quality, other technical capabilities may well be academic. The quality of the service we deliver to you will shape the quality of the service you provide to your customers. It must be excellent.

Seven qualities

1 3 6

4 7

5

2



There was a time when a diagram of an investment bank’s communications requirements would have made a very simple graphic. Today, competitive pressures and the realities of the interconnected trading world mean that graphics would look considerably more complicated. Investment banks must put client needs at the heart of the IT and communications models and the most fundamental of those demands is secure, reliable any-time, multi device access to sophisticated web and mobile-enabled services. Many institutional or corporate customers will also expect services to be tailored to suit their individual circumstances.

The ever increasing sizes of online customer communities drives attendant considerations for data protection, privacy and information security.

Information and system availability play a hugely important part too. For most trading and compliance systems, down time is simply not an option. The financial harm and reputational damage that can be caused by even a few seconds of downtime can be enough to de-stabilise even the largest of firms.

Insights & options: Customers are demanding more

Accessibility for Internet users

Customers who use your services through the Internet will expect any-time, multi device accessibility. Apps are increasingly replacing browser based services. Ease of use is paramount.

Delivered service quality for Internet access services can vary dramatically. If you are looking to secure a consistent “Internet connected customer experience”, look for providers offering diverse and scalable connections to your data centres, global exchange peering in countries that matter to you and multiple upstream Tier 1 transit providers to ensure continual service availability. (Tier 1 transit provider networks DO fail occasionally).



In our experience, network service availability is simply not a matter for compromise, especially for core trading platforms and exchanges.

Delivering a world class customer experience is challenging, especially through the Internet. Server and storage platforms must be appropriately sized, designed and engineered. The internal networks that support them must provide sufficient bandwidth to handle day-to-day variations in workload, and enable longer term scalability. Internet connections must guarantee that traffic served to the Internet is unimpeded.

Enabling customer driven transformation

Our contribution is to ensure that the services connecting IT platforms in your data centres provide high speed gateways to the Internet, supporting trading ambitions and providing flawless customer experience.

Dependability must be “engineered in”We offer two primary managed service types for inter-data centre and inter-office connectivity.

Our optical networking services (wavelengths) are based upon advanced Ciena 6500 series Reconfigurable Optical Add-drop Multiplexors (ROADM). These platforms not only provide state of the art low latency performance for wavelengths scaling from 1 to 100Gb/sec, they are also engineered to provide the highest levels of availability and include customer selectable options for automatic protection switching, providing automatic and near instantaneous switchover to alternative network paths in the event of primary path interruption.

Our advanced Ethernet MPLS platform is based upon a fully meshed deployment of hundreds of Alcatel 7750 carrier Ethernet service routers. They are large-scale platforms engineered with multiple resilient sub-systems and protected power supplies to ensure high availability.

Customer site availability levels of up to 99.999% (99.85% is our single path default promise) can be engineered by providing multiple access network paths to each site. Availability levels of 100% can be guaranteed by the provision of three diverse, separate paths to each site.

Insights & options: Customers are demanding more (cont.)

Dependability must be “engineered in”

Wavelength scaling from 1 to 100Gb/sec

99.999%of customer site availability

levels can be engineered by providing multiple access network paths

to each site



In the last decade, market and technological changes have had a profound effect on the trading floor. The look, atmosphere and capabilities on the trading rooms have altered beyond recognition. Specialist terminals now facilitate trading in hundreds of new markets in equities, derivatives, bonds, commodities, FX and money markets, funds and exchange traded products. Trading volumes have increased massively. Many traders are now tech, as well as market, specialists.

In terms of what happens in these rooms, many individual trading companies now execute hundreds of thousands of online trades every day, with millions transacted by the largest companies and exchanges every day. The requirement for secure connectivity to multiple destinations, including exchanges, other market participants and an organisation’s own data centres, inside this country and beyond, is coupled with a requirement for exceptionally high data transmission and network speeds.

Trading floors simply need much more communications bandwidth than most other types of office. With concurrent real-time feeds from many different trading and market information systems, the trader’s desk has become one of the most performance sensitive and bandwidth heavy desktops in the world. And the challenge of meeting these technical requirements is complicated further by the need to comply with all regulatory stipulations around data security and storage.

For bankers and traders, robust, high capacity, reliable, secure and scalable high speed data network connectivity is no longer a nice-to-have.

Insights & options: The trading floor is trading faster



For Direct Market Access (DMA) services, it has become a competitive imperative. Neither downtime nor the financial, operational, reputational or legal damage associated with security breaches will be tolerated by customers who are themselves often facing intense competitive and financial pressure.

Latency is the deadly enemy of DMA high frequency trading. It is usually the supplier that is able to offer the shortest fibre route between trading systems that is able to offer the fastest service. Some trading positions may mean that the cost of such connections is largely immaterial, making new digs between premises a real possibility (although planning regulations can often defeat such ambitious schemes and time-to-market advantage may be lost by the protracted lead times). Fortune can smile sometimes though, and it may just be that you find a supplier that already has spare fibres on the routes you need. If you are not so lucky, look for suppliers who are prepared to ‘aggregate’ the routes of other suppliers with their own, ‘splicing’ different sections of fibre together to form a single, managed route. This is not only a faster and less expensive way of doing things, it minimises the amount of digging to create new routes. Digging is VERY expensive and is fraught with complication, especially in older cities, where congestion and conservation present dual challenges not found in more rural areas.

When you are budgeting for private fibres, remember always that as soon as you ‘light’ your new fibres, you will be liable to business rates and the charges are NOT insignificant. See http://bit.ly/1DSdbGa. It may be advantageous from a rating perspective to ask your supplier to light the fibres on your behalf, as a fully managed service. Rates decrease for those that have large fibre optic estates.

Availability: for direct market access

DMA changed the game. New and established trading businesses have ever increasing numbers of connections to an ever widening number of exchanges and trading gateways hosted in commercial and private data centres.

Minimising the time to realise a new trading opportunity means choosing inter data centre connectivity providers that can deliver reliable, low latency optical networking services quickly. Seven elapsed days or less should be your benchmark for efficient operators.

However, if you need new dedicated fibre connections into your own buildings, you should anticipate anywhere from 90-180 days for necessary civil engineering works, planning permission and landlords wayleaves.

Insights & options: The trading floor is trading faster (cont.)

http://www.manuals.voa.gov.uk/corporate/publications/Manuals/RatingManual/RatingManualVolume5/sect871/rat-man-vol5-s871-pn-Fibre-Draft.html



Insights & options: The trading floor is trading faster (cont.)

Enabling trading floor transformation

There are some unique network qualities we can help you with here.

We have a high level of experience in engineering and delivering very high availability network services. Our networks are used to provide telemetry and control systems support for our power stations and for our electricity distribution and supply networks. We understand about network security and reliability. The only acceptable failures on our network are acts of God.

We also have a very large fibre optic network footprint with, and between, key cities in the UK, including a very large footprint in London. We can use this to help you with your own private fibre network service. We can also aggregate fibre availability from other suppliers with our own, giving you rapid availability and lowest possible costs.

If you need very high performance networking services in London, or between London and other city centres, our high availability MPLS Ethernet and Optical networking platforms will provide a robust basis for extending connectivity to your own sites.

Our in-house specialist cabling teams can help with trading floor wired and wireless networks too.



Security consultants often describe security vulnerabilities created by network design as being the equivalent of someone fitting a state of the art lock to their front door, but leaving a window open. Companies that do not pay adequate attention to the physical security of their communications infrastructure may be guilty of making precisely this kind of mistake.

For example, having world-class security to protect your company’s data centres will not count for much if it is possible to ‘tap’ fibre optic cables outside the front gate. It is true that this could be difficult to do, but it is quite possible to intercept information being sent via fibre if the would-be hacker has physical access to the cable. They can then use a cheap optical ‘tap’ device (readily available online), which diverts some of the light on the cable, allowing data passing out to be recorded on a laptop. This is even easier if the hacker can access amplifiers on the cable.

Like many other methods used to penetrate IT security defences it may seem unlikely that anyone would actually go to the trouble of doing this, but there is no question that it is being done. In 2013 Edward Snowden revealed that both the NSA and GCHQ have engaged in this type of activity, on a large scale, with hundreds of cables tapped. An organisation seeking to breach security in this way would simply weigh up the costs and potential benefits of doing so.

The fact is, tapping is possible and companies must assess the risks, then act accordingly. This also serves as an illustration of why it is a good idea to work with a service provider that understands these issues and considers all possible security issues when helping companies to design and deploy communications networks.

Fibre networks – the unseen risk

Keeping secure: fibre tapping – some practical safeguards

We frequently come across customers who are concerned about this topic. Many, however are just not aware of the risk. There are two practical ways we can help mitigate the challenge.

We recommend some very basic steps to protect the physical fibre routes (which are usually underground). Roadside inspection chamber covers should, for example, be lockable and locked, as should all equipment cabinets on customer and service provider premises. Be wary of fibre interconnects in public meet-me areas in commercial data centres. Mischief can happen here. You may prefer direct fibre paths to your equipment.

Wire-speed encryption of the data is one such option and our optical networking platforms support encryption between our own network nodes as a customer selectable, chargeable option. This however leaves the ‘last mile’, from our network to yours, at risk.

Encryption can be extended right out to customer premises and this, although a more expensive option, makes fibre tapping/hacking in commercial data centres (an obvious place for legal and illegal intercepts) a less rewarding tactic (encrypted data can always be decrypted but the time and cost taken to do so may negate the perceived benefit of the ‘tap’).



IT buyers at investment firms of all kinds have long been attracted to the operational and cost efficiencies provided by virtualisation, orchestration and cloud technologies. These technologies can play a very useful role in consolidating and streamlining what are often unwieldy IT infrastructures, built in a piecemeal way over long periods of time. Use of these technologies is becoming particularly popular in the front and middle offices of financial companies.

Both virtualisation and orchestration can help make IT infrastructures more resilient, as well as improving efficiency and performance. They can effectively introduce additional flexibility too, allowing compute capacity to be increased or decreased as necessary. That flexibility extends to network designs, which can be shaped to suit business need and to allow integration with existing IT assets.

All this is good. But the operational downside of these technologies is the additional complexity, service demand volatility and, in some-cases, security vulnerabilities that can be associated with their use, issues that can be exacerbated if the organisation is using other virtualisation/abstraction networking technologies, such as Software Defined Networking (SDN), or Network Functions Virtualisation (NFV).

Successful deployment of these technologies is very largely dependent upon fast, reliable optical or Ethernet services. The infrastructure must also be able to manage unpredictable, fluctuating demand, without allowing downtime.

Firms will need to work with service providers that are able to offer secure, dependable, flexible, scalable services, or to invest in bespoke networking solutions capable of handling these peaks and troughs. Only then can the company reap the full operational benefits of these technologies.

Insights & options: IT is getting smarter

Making IT infrastructures more resilient

Virtualisation is saving money, energy and reducing

carbon footprints

Orchestration technologies virtualise distributed

data centre assets



Enabling technology transformation and evolution

At a data centre level much effort is focused on the harmonisation of storage and data network traffic flows around Ethernet. Whilst Fibrechannel remains a popular legacy choice and Infiniband offers a choice for high performance needs, the commoditised cost and operational advantages of a single network platform for everything seems compelling to many.

We’re agnostic in the debate. Our regional and national 10, 40 and 100Mb Ethernet services provide the high levels of bandwidth and reliability that converged data centre network strategies demand, whilst our Fibrechannel and Infiniband wavelengths will remain popular for years to come.

Our role is to enable the technical transformations taking place in the data centre, whilst recognising that one horse will not suit everyone. Every trading firm has their own challenges, pace and preferences. Our goal is to help as many as possible on their own journeys, whilst underpinning it all with our brand of high availability, low latency, high security and rapid scalability that both old and new IT platforms and trading strategies demand.

Insights & options: IT is getting smarter (cont.)



In any discussion about major alteration to the IT infrastructure of an investment bank or trading firm, compliance is the elephant in the room. The huge range of (occasionally contradictory) national and international compliance requirements that can apply to financial companies add a whole additional layer of complexity to the planning and design of network structure, capabilities and capacity.

Compliance requirements may also add significantly to the operational pressures placed on networks and IT infrastructures, because of the need for information to be routed to senior managers to give them a clear picture of their company’s compliance profile. Compliance may alter the scale and scope of some operational requirements – by altering security requirements, for example.

Compliance demands can also exacerbate the problems facing infrastructures and network issues that have been created by the impact of the other three megatrends. Each of those trends is driving more data onto networks and into storage facilities and much of this data must be stored, managed and/or reported upon for compliance purposes.

But the fundamental problem every company needs to overcome is that the operational shortcomings of the network can frustrate or derail their attempts to meet compliance requirements. In the end, it really does all come down to the network – a strong, reliable, secure network can protect the business against the consequences of regulatory problems, as well as delivering all of the other business benefits that a world class network can provide.

Insights & options: Compliance is getting harder

Compliance requirements

Bankers and traders are re-engineering IT systems to meet EMIR obligations

Trusted network partners are required to support

compliance requirements

As more regulations are implemented across the EU,

efficient process management is increasingly valued



Enabling regulatory compliance and transformation

In our first eBook we outlined many of the compliance requirements facing companies working within the investment banking sector. Readers should understand that the potential negative consequences of non-compliance is significant, particularly in the case of capital adequacy requirements.

Compliance and audit introduce two more challenges for networking specialists. Firstly, the audit trails that compliance now insists upon can hugely increase the amount of data recorded for each transaction, which in turn, increases network bandwidth requirements.

Secondly, systems availability requirements, particularly for prime trading systems have become very demanding. Penalties afforded against those that compromise the financial standing of their customers and partners can be severe and so fault tolerance and geographic diversity of key systems have become best practice.

In both of these areas, we can offer specialist help. Our optical and Ethernet MPLS platforms are both engineered with geographic diversity requirements in mind and the high end specifications of those platforms lend themselves, by design, to supporting very high bandwidth, low latency, high availability services.

Insights & options: Compliance is getting harder (cont.)



The financial sector has recovered well from the ‘great recession’ and is once again growing faster than before the crisis struck, according to research from the CBI. But no company has any right to expect success as a result. They need to invest in technology that will allow them to cope with the impact of the four megatrends that are re-shaping the sector. Without networks capable of meeting access requirements and providing the reliability, flexibility, scalability, security and performance needed, companies risk losing market share and failing to meet compliance requirements.

Companies need to work with service providers able to help them to devise effective technology and network design and implementation, building or leasing metro and long-haul network infrastructures resilient and flexible enough to meet all of these requirements – but to a time scale and at a cost that is appropriate for that company. Only by doing so will those companies be able to take full advantage of the opportunities being created by those megatrends as the economic recovery and further evolution of the financial sector continues.

Does this sound like your business? Do you need to connect to multiple sites into a coherent and secure collaboration and service delivery network? Do you have data backup and archive systems that are best hosted off-site? Is high performance, low latency access to commercial data

centres something you need? If yes, why not find out more about how we can help you connect to your customers with high performance UK-wide connectivity. Please call us on 0345 070 1997 to discuss how we can help. Or, email us at [email protected]

And if you want us to contact you, please fill in a form and we’ll get back to you.

Conclusion Investment banking eBook series

Look out for eBook 1:

The first eBook in this series examined four megatrends that are reshaping the business environment in the investment banking sector:

Four investment banking megatrends:

1. Customers are demanding more

2. The trading floor is trading faster

3. IT is getting smarter

4. Compliance is getting harder

To catch up on this issue and learn all about these megatrends, you can find your copy of eBook 1 here.

http://www.ssetelecoms.com/get-in-touch/

http://www.ssetelecoms.com/ebooks/investment-banking-megatrends/

SSET eBook Finance WEB

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