⦿ 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.

⦿ Key Developments

• 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.

⦿ Strategic Context

• 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.

⦿ Strategic Implications

• 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.

⦿ Risks & Constraints

• 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.

⦿ Watchlist / Forward Signals

• 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.