The Chicago Mercantile Exchange – one of the world’s most diverse marketplaces for financial derivatives – has been operating its IT systems and infrastructure for years in its own data centers and on site in order to operate them securely and with top performance.
But in recent years the company – formerly known as CME Group – has been experimenting with cloud computing to see how it could advance the derivatives market and improve its IT infrastructure and technology systems for customers and investors.
After evaluating these previous experiments and pilots, the CME Group recently signed a 10-year strategic partnership agreement with Google Cloud to move all of its security and privacy sensitive IT systems to the cloud as part of an improvement-oriented transformation of its operations.
“Through this long-term partnership with Google Cloud, CME Group will transform the derivatives markets through technology, expand access and create efficiency for all market participants,” said Terry Duffy, chairman and chief executive officer of CME Group, in a statement. “To ensure a smooth transition, we will work closely with customers to implement a step-by-step -proach. This partnership will enable the CME Group to bring new products and services to market faster – and all in a flexible and scalable environment that creates a multitude of opportunities for the market. “
Under the agreement, CME Group will begin migrating its technology infrastructure to Google Cloud from 2022, starting with data and clearing services, with the goal of eventually moving all of its markets to the cloud, the company said.
By using the Google Cloud Platform (GCP), the CME Group is trying to scale its infrastructure while improving access for more market participants, optimizing costs and making onboarding easier for new users. GCP will also add real-time data analysis and machine learning c -abilities to help the CME Group provide its customers with on-demand information and toolkits for developing models, algorithms and real-time risk management.
As part of the agreement, GCP and CME Group will also work together to develop new products, including risk mitigation tools, analytics services and user-centric platforms that both companies can benefit from, a statement said.
To enable this for the CME Group while ensuring security and privacy, GCP will use open source technology standards and enhanced cybersecurity protection across its global network to achieve the contract objectives. Financial firms are even more concerned than most other companies about security with regulatory and compliance issues, and major concerns about privacy, security, and cyberattacks, which can instantly harm their businesses and customers.
“This is fundamental to the CME Group,” a company spokesman told EnterpriseAI. “We believe that the next generation of financial markets will depend on the ability of market participants of all sizes to have easy access to trading anywhere, anytime. The best way to ensure this is to migrate our technology to the cloud. Google Cloud provides access to an industry-leading cloud platform with unparalleled technical expertise and a strong track record. “
The CME Group has also worked with all major cloud providers on various -plications and technologies in the past, the spokesman said. “We assume that these relationships will be continued in the short term. We are constantly reviewing our supplier relationships and changing or evolving as needed to ensure that we can best meet our customers’ needs while providing service with the most efficient means. “
As the CME Group makes progress in moving its systems to GCP under the contract, the company “is committed to taking a measured -proach to migrating our technological infrastructure to ensure a smooth and orderly transition of our markets,” said the spokesman. “To achieve this goal, we will work closely with our customers during this process. We expect more details to become known as we plan the migration, and we will provide further information to our customers, partners and employees as soon as it becomes available. “
As part of the 10-year partnership, Google also made a $ 1 billion stock investment in CME Group through a new series of non-voting convertible preferred stocks.
“CME Group has a centuries-old track record of helping investors access new markets and is known for innovating in financial markets,” said Thomas Kurian, CEO of Google Cloud, in a statement. “Bringing together the industry-leading financial talents of CME Group with the deep technical expertise of Google Cloud will help accelerate technological innovation in c -ital markets infrastructure.”
Shelly DeMotte Kramer, analyst
Shelly Demotte Kramer, Principal Analyst and Founding Partner at Futurum Research, called the CME Group’s deal “a massive win for Google Cloud,” which when combined with the $ 1 billion investment in the CNE Group shows that [Google Cloud CEO] Thomas Kurian doesn’t fool around when it comes to growing market shares and trying to penetrate the financial services industry. “
The financial services sector has long been coveted by the hyperscalers, Kramer said, with Amazon Web Service’s pilot programs in Sing -ore and Europe being good examples of what needs to h -pen to continue the transition.
“But it is definitely a high pressure situation,” said Kramer. “If this doesn’t work in any way, the impact on the cloud service provider’s markets and brand could be significant. But these people know that. “
For Google Cloud, “this is a big step … especially when it comes to entering the US financial services market and beating others,” said Kramer. “Looks like the strategy is solid to deal with non-speed sensitive services like data and clearing, with a plan to do more once those use cases emerge. It really is the only way to do something like this, and it will certainly be interesting to watch. “
Another analyst, Rob Enderle, director of the Enderle Group, took a more cautious -proach to the deal.
Rob Enderle, analyst
“Google is largely distrusted as a cloud provider because its primary model is the sale of customer data,” says Enderle. “So they buy what may be in control of a trading giant, force that giant to use its service, and then plan to use that to open up the financial market. I doubt it will work because this looks like a bribe and buying a controlling stake in a trading company to force an ill-advised decision painted over heart attacks from the SEC, DOJ, and FTC. “
And should there ever be a related security breach associated with Google’s services, “it will likely trigger a series of legendary penalties against Google in terms of fines, penalties and antitrust reactions – and we may not even need a breach,” to trigger this “. because it looks dishonest from the point of view of a supervisory authority, ”said Enderle. “The right solution would be for Google to outsource that effort and keep it at bay and then win the brand back to get the core trust problem right, and not buy into a market that you are not structured to safely support . “
Enderle said, Google’s “move is a great example of how tactics trump. It does give them a reference account, but the path they have chosen not only destroys the power of that reference – it prepares them for a massive regulatory backlash in their future. “
Overall, the deal could end badly for both sides, said Enderle. “It could also lead to legislation prohibiting” [Google] from the market. Doing things like this while the tech sector has a goal behind it as an election year -proaches is even more dangerous as it is a legitimate platform to run on. This step also shows that risk management and compliance at Google may be violated, as this should never have given the green light. “
As a marketplace for derivatives, the CME Group enables its customers to trade futures, options, spot and OTC markets, optimize portfolios and analyze data on their investments. The CME Group consists of four exchanges – the Chicago Mercantile Exchange (CME), the Chicago Board of Trade (CBOT), the New York Mercantile Exchange (NYMEX), and the Commodity Exchange (COMEX). The CME was founded in 1848 as the world’s first futures exchange based in Chicago.