TECH TUESDAY is a weekly content series covering all aspects of capital markets technology. TECH TUESDAY is produced in collaboration with Nasdaq.
A recent report by Nasdaq and The Value Exchange – “Building Better Markets for Tomorrow” – showed that 84% of investors plan to increase their exposure to LatAm over the next 12-24 months.
Institutional and global investor demand is there. But in order for Sao Paulo, Mexico City, Buenos Aires, and other LatAm financial centers to fully unlock foreign investment flows, the region needs a new operating model, as 59% of investors reported encountering significant market inefficiencies that obstruct or limit their investment capabilities. The primary issue identified is regional variance in post-trade processes such as settlements, securities lending, collateral management, and proxy voting; this fragmentation complicates transactions while increasing costs and risks.
To overcome these barriers, the report advocates for regional consolidation or harmonization of market practices, as well as efforts toward platform modernization and standardization. Such reforms could streamline operations, reduce costs, and enhance the overall investment climate. This approach is seen as essential for building the LatAm operating model of tomorrow, which promises greater efficiency and competitiveness.
One example of this approach is nuam, which was formed in 2023 as the regional holding company that integrates the stock exchanges of Santiago, Lima, and Colombia.
The end goal is “a common securities market with a unique trading platform, designed to improve liquidity, access and scale,” BNP Paribas said in a report. It represents progress in modernizing the region’s financial infrastructure… By using advanced technology and innovative strategies, nuam intends to solve some inefficiencies in the traditional financial systems in Latin America.”
The upside of post-trade change is less costly and risky buy-side operations, which ideally would lift regional investment activity. On average, survey respondents anticipate an 11% cost saving from the standardization of post-trade processes. Specifically, significant savings are expected in areas like securities lending and settlements, with some investors predicting cost reductions of up to 20%.
Looking ahead, the survey participants ranked changes in market infrastructure as the most impactful factor for a modern and future-proofed operating model. There is also a strong belief in the benefits of post-trade transformation, and moreover, addressing current challenges could position Latin American markets to capitalize on emerging opportunities in new asset classes, such as tokenized digital assets and voluntary carbon credits.
The survey underscores a critical juncture for Latin America’s financial markets. By addressing the inefficiencies and embracing regional harmonization, the region can unlock significant investment flows and establish a more robust and efficient financial ecosystem. This transformation will not only cater to the needs of today’s investors but also pave the way for future innovations and growth.
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Trading Infrastructure Trends: A Look Back at 2024 and What’s Next for 2025
By Alastair Watson, Managing Director, Transaction Network Services (TNS)
The trading infrastructure landscape has picked up the pace over the past several years, with trends and challenges reshaping how firms approach their technology strategies. As we look ahead to 2025, key developments in cloud adoption, market data dissemination, and technological innovation are setting the stage for what looks like it will be another transformative year.
Reassessing the “cloud first” strategy
For over a decade, financial firms have been pursuing a “cloud first” approach, drawn in by promises of scalability, resilience and cost efficiency from hyperscaler cloud providers. However, 2024 highlighted some inherent challenges with this model that have required us to reassess. First is non-deterministic latency, which hinders trading use cases requiring fair and equal access. Additionally, high latency when interacting with liquidity sources outside the cloud and problematic multicast market data dissemination further limit its applicability.
Security concerns in cloud environments have also remained an issue. Hyperscalers are by definition multi-tenancy and the range of clients is extremely broad. By virtue of this diverse client base and their sheer scale, hyperscalers are more difficult to police and protect than bare metal infrastructure.
Perhaps most significantly, the rising cost of scaling cloud environments is causing concern. While the cloud offers flexibility and the ability to scale rapidly, without significant controls the cost of leveraging the cloud has also grown rapidly. High data egress fees—costs associated with moving data in and out of cloud environments—are a growing pain point for firms that require large-scale data transfers.
In response, TNS has observed a trend of larger firms pivoting toward fully managed physical environments. These dedicated setups address several limitations of the cloud, including support for native multicast traffic, improved security and reduced operational and data transfer costs.
Supply chain recovery
The COVID-19 pandemic created significant supply chain disruptions, with hardware procurement timelines extending to nearly a year. This bottleneck hampered trading firms looking to expand their operations.
Fortunately, 2024 saw improvement and eased supply chain issues. Firms are now able to source and deploy hardware more quickly, enabling clients to establish trading operations in new markets in as little as six weeks.
Technological innovations on the horizon
Emerging technologies will reshape the trading industry in 2025. Layer 1 switching, which has already gained traction among quantitative trading firms, is undergoing significant upgrades. While current implementations cap bandwidth at 10 Gbps—adequate for order entry but insufficient for larger market data feeds—we’re seeing transitions to 40 Gbps and 100 Gbps Layer 1 switching solutions. These advancements will support data-intensive feeds like OPRA’s US Options feed, which frequently bursts beyond 40 Gbps.
Another area of focus is the challenge of supporting multicast market data in cloud environments without packet loss. This is a worthwhile problem to solve and something we expect the industry to make progress with in 2025.
Field-programmable gate array (FPGA) technology is also gaining traction in quantitative trading for its ability to accelerate data processing and liquidity interaction. While deployment and management of this technology is complex, ongoing improvements should drive broader adoption in 2025.
Global market growth is expected
The global equity options market saw robust growth in 2024, driven by several factors. Elevated market volatility, caused by geopolitical tensions and macroeconomic uncertainty, created lucrative trading opportunities. This attracted new participants, including firms with experience in non-US equity options markets entering the US market.
Additionally, changes in market microstructure, such as the introduction of new exchanges like MIAX, MEMX and IEX, have fragmented liquidity and expanded trading opportunities. We’ve seen EMEA-based quantitative firms looking to establish co-located solutions to access these burgeoning markets. Outside the US, the National Stock Exchange of India (NSE) is garnering interest as one of the most dynamic and rapidly growing emerging markets. India’s complex operational environment has led many financial firms to consider building connectivity and infrastructure in Mumbai. And as access to the Bombay Stock Exchange (BSE) improves, a similar surge in activity is anticipated there.
Geopolitical influences and market volatility
Global events continue to cast a shadow over financial markets. Domestically, political developments, including a new administration, are likely to create both opportunities and uncertainties. Firms should be primed to move quickly to deploy infrastructure for any new opportunities.
With fast moving markets comes an increasing need for all market participants to focus on optimizing their latency when sourcing market signals and interacting with liquidity. Those who fail to do this will suffer from negative selection or the inability to target opportunistic liquidity.
As 2025 approaches, the trading industry is at a turning point. Firms are balancing the flexibility of cloud solutions with the performance and cost advantages of dedicated trading infrastructure. Technological advancements, global market dynamics and geopolitical influences are reshaping the landscape, and financial firms should be ready to balance these in an ever-evolving market.
Alastair Watson, European Managing Director for TNS’ Financial Markets business, has over 20 years’ experience delivering technology solutions for Equities global markets. He brings banking sector insight, having worked for UBS, where he was latterly responsible for building market leading execution technology and growing the UBS quantitative client base in EMEA.