Cloud-based exchanges could change the value of a broker dealer

⦿ Executive Snapshot

What: Nasdaq and CME are advancing market infrastructure to the cloud, but with differing approaches.
Who: Key players include Nasdaq, CME Group, AWS, and Google Cloud.
Why it matters: This shift could redefine the role of broker-dealers and alter latency dynamics in trading.

Nasdaq has migrated the core trading system of three North American markets to AWS Outposts, processing up to 36 billion daily messages.
Nasdaq reports low double-digit microsecond end-to-end and order-to-trade latency, with up to 10% better round-trip latency.
CME Group is collaborating with Google Cloud to build a private cloud region and co-location facility in Aurora, Illinois, aiming for equal network latency between self-managed and Google’s infrastructure.
CME’s infrastructure plan includes Ultra Low Latency Google Compute Engine instances and a dedicated ULL Network for order routing.
CME's production migration is scheduled to start in late 2027 and continue through 2028, with a disaster recovery setup planned for 2029.

The movement towards cloud infrastructure marks a significant evolution in market architecture, potentially enhancing speed and efficiency in trading.
Both exchanges are leveraging hyperscaler technology, but their differing strategies reflect broader trends in financial technology and market operations.

The immediate consequence may be a reduction in the value of broker-dealer support as exchanges potentially take over some of their functions.
Long-term, a cloud-native market model could disrupt the existing market structure, affecting intermediaries and changing how market data is delivered.

There are concerns regarding stability and determinism in CME's cloud approach, which could impact market participants' confidence.
The success of these cloud infrastructures depends on overcoming technical challenges related to ultra-low latency requirements.

Key milestones include the completion of CME’s sandbox in mid-2026 and the commencement of production migration in late 2027.
Monitoring the performance and stability of Nasdaq and CME's cloud implementations will indicate the success or failure of these initiatives.