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Amazon, Google Lead Contenders for SEC’s Big Data Project (AMZN, GOOGL)
September 1, 2016 News


Technology-aided attempts at market manipulations, instances of flash crashes, and increasing threats of security breaches are causing enough nightmares for market regulators. They need faster, reliable and timely access to trading data for necessary prevention and detection. Data continues to play the key role for the financial-services market, as an increasing number of streams within the financial markets are becoming data-driven. However, accessing it becomes a challenge, as key information is scattered around multiple systems held by different parties, which include the exchanges, investment houses and the self-regulating agency the Financial Industry Regulatory Authority FINRA, which makes it time-consuming and complicated to gather and collate information.

The Unified Database Solution

Attempts by the U.S. Securities and Exchange Commission (SEC) to manage all the information are gaining momentum for building a single, large, cloud-based financial data warehouse, referred to as the Consolidated Audit Trail (CAT). Aimed at better regulations facilitating timely interventions and verifications, will involve storing all of exchange, regulatory, trading, customer and financial data.

Alphabet Inc.’s Google (GOOGL) and Inc. (AMZN) are the front runners in bidding for the SEC’s cloud-based data storage, a project that could cost as much as $92 million to build and an additional $93 million annual for maintenance, according to Bloomberg News.

There are concerns in the market regarding such external storage of sensitive data amid rising cases of security breaches. The data is expected to include key information about customers and broker-dealers. Additionally, it may also lead to cost overheads by market participants.

However, established tech giants like Amazon and Google have proven expertise in hosting data of multiple businesses on their cloud services, without, themselves, having access to the data.

The implementation of CAT is expected to be in phases, with the initial one encompassing only order and execution information for equities and options data from exchanges and FINRA. Information on broker-dealers may be added later.

Rising Cloud Services

Cloud services are emerging as the fastest-growing areas for tech firms. PricewaterhouseCoopers estimates that the big data market for financial services will rise to $53.4 billion in 2017 from $32.1 billion last year.

Alphabet’s Google managed to beat street expectations for last quarter thanks, in large part, to a spike in revenues from cloud services. More than 55% of Amazon’s second-quarter operating income was from cloud services, while constituting less than 10% of total revenues.

FINRA and Thesys Technologies also are contesting for the CAT project, and the selection of a vendor is scheduled to occur by January 2017. The first phase for CAT is expected to become operational by the end of 2017.
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