The Strategic Role Of Data Centers For Exchanges
By Tinku Gupta,Executive Vice President, Singapore Exchange
Long gone are the days of waving and shouting to communicate orders in an exchange. Instead, today it is cables and servers that interact within the tranquility of air-conditioned spaces. The transition – a move from trading pits to data centers – means that being close to the action is facilitated through data centers. In the context of a market operator like Singapore Exchange (SGX), data centers are therefore the focal point of the vibrancy of our markets.
Building a Financial Ecosystem
The strategic role of an exchange’s data center is to build a financial ecosystem of participants – brokers, market makers, clearing members, and settlement banks, just to name a few. At SGX, we also connect with other markets such as Chicago, Hong Kong, Tokyo, and Australia so that our customers can conveniently access other liquidity centers.
This draws a parallel to a traditional data center which also has its own ecosystem of network providers across telecommunications, power, information security, and now, fintech players. For all its benefits, interconnectivity also poses the challenge of ensuring that a failure in any component does not significantly impact the entire infrastructure and hence the need to adhere to the highest standards in terms of latency, volume capacity, and service availability.
It is critical for exchanges to understand each part of an exchange’s infrastructure ecosystem, and the interactions between each participant, especially with the pace of change evident in a data center. Whether it is a piece of hardware that is replaced or added or the software that is configured or servers upgraded, a thorough understanding of the infrastructure ecosystem becomes a key differentiator for quality.
Complying with Evolving Regulation
Exchanges and financial institutions around the world have been subjected to increasing levels of regulation since the global financial crisis of 2008. Due to the integral role they play in the financial system, these regulations also extend to data centers.
Being located in Singapore has given SGX geographical and environmental advantages. We are fortunate to be in a seismically safe zone and shielded from natural disasters. Our geography, together with pro-business policies and a climate of political stability means Singapore is the ideal location for data centers to host mission critical systems.
It Is Critical For Exchanges To Understand Each Part Of An Exchange’s Infrastructure Ecosystem, And The Interactions Between Each Participant, Especially With The Pace Of Change Evident In A Data Center
Singapore has grown as a premium hub for data centers, and with more built, data centers are becoming a commoditized facility, as compared to the bespoke model of yesteryear. To ensure a high level of resiliency and redundancy with no single points of failure, while enabling ongoing maintenance, data center operators must differentiate themselves through the design and construction quality of their facility. All this must be done while remaining cost-competitive.
A data center with the best technical infrastructure components, however, does not necessarily translate into the most effective data center. A data center is the summation of robust design, reliable components, rigorous preventative maintenance regimes, established process and procedures, and trained staff in providing exceptional data center services. The data centers are best in class on all of these attributes.
SGX does not have the necessary economies of scale required to build and run its own data center. However, as a critical infrastructure provider, our focus is on build-in resiliency and monitoring to the very highest standards, and we take up space within a large data center. We therefore need our data centre providers to conduct thorough assessments (Threat Vulnerability Risk Assessment - TVRA) and adhere to standards such as ISO9001 (Quality Management System), ISO27001 (Best Practice for Information Security Management System), SS507 (Information and Communication Technology Disaster Recovery Services), SSAE 3402 (Statement on Standards for Attestation Engagements), as well as many others.
For exchanges such as SGX, data centers are here to stay until such time that trading strategies no longer rely on low latency and consistent connectivity. Therefore, it is important that we continually embrace innovation to ensure that data centers are utilized efficiently. Innovation in the areas of energy and water efficiency, as well as modularized setups, will help advance the data center industry globally. Singapore, as part of, is Smart Nation journey, as a Green Data Centre Programme and is aiming to arrive at a proof of concept for the world’s first Tropical Data Centre that will ideally reduce energy requirements.
SGX ensures both operational and environmental sustainability in a sector that is so reliant on technology. For example, we require that our data center providers are compliant with environmental sustainability standards including the SS564 (Green Data Centre1) and BCA-IDA Green Mark Platinum standards.
We also ensure our data center is efficiently used by embracing technological innovation – be it hybrid cloud or distributed ledger technology, which can be borderless in distributing computing power. For example, we are already adopting a hybrid cloud framework to select the appropriate systems that would benefit from the cloud model, yet retaining the flexibility to operate mission critical services in-house within our data center. That way, we can be energy and cost efficient without compromising on security and resiliency standards.
Striking a Balance
In essence, we are focused on ensuring that our data center strikes a balance between modern innovation and support for the ever-evolving financial community while staying abreast of regulatory developments. The data center industry principally remains one of innovation and will continue to transform the financial sector, just as it has already left its indelible mark on the now almost-extinct ‘open-outcry’ trading floor.Singapore Exchange is an investment holding company located in Singapore and provides different services related to securities and derivatives trading and others. SGX is a member of the World Federation of Exchanges and the Asian and Oceanian Stock Exchanges Federation.