Rob Palatnick, managing director and chief technology architect at DTCC, shares how the company implements a cloud-based platform and how it is replatforming its credit default swap project through distributed ledger technology.
Here is the transcript
Rob Palatnick: So, in terms of cloud, we looked at cloud in the last five years. We've been working since 2012 with cloud vendors and with different opportunities to leverage the cloud. We started with the public data and doing things with public applications and moving those to the cloud. And actually, we went live with our first application in the cloud at the end of 2012.
Since then we've been looking at the other opportunities to increase the utilisation because what we found is the cloud is a platform that can scale to unlimited resources. The cost is exactly how much resources do you use. And if you don't use those resources, you stop using those resources you don't pay for them.
As we tried out different capabilities as we turned on systems that only run once a month, we found out that now we are only paying for the technology underneath the infrastructure that support those systems on a once a month basis. Instead of that infrastructure seating in our data centres, mostly unused, except when we are using it. So we've looked at that opportunity and we looked at the capabilities of that, and we started moving more applications to the cloud. Really focused on data and internal testing applications, and data analytic applications. But now we've gotten comfortable enough with our progress and the platform. And we've gotten also comfortable enough of that we can build more resiliencies, more security, and more capability into the cloud platform then we can have in our data centre premises.
We've been also working with our regulators, and our supervisors, and our customers. And we recently just put out a white paper that describes our perspective on cloud to move the discussion forward. And really pave the way, and lay the groundwork to start moving out critical transaction processing applications into the cloud. So, we are starting to move forward on that program, we are starting to build the capabilities, the extra resiliency that the cloud brings the opportunity to implement with the expectation that over the next couple of years we'll be able to start moving really critical core applications to the cloud.
Certainly, our credit defaults team who operate our project are taking a warehouse, which we call "trade information warehouse" of credit default swaps that we built in 2006 on a mainframe.
That was really an industry-centred ledger. Each firm had either a paper or spreadsheets or their own ledger and we created an industry-centred ledger. Now, more than ten years later we've been at a way of re-platforming that and lowering the cost to the industry of having that ledger. And working with an industry group, we decided to implement it on a distributed ledger. We did a proof of concept of the technology, and it proved successful. We did a RFP, and picked a set of partners to work with. And now we are deep into the implementation of that project. The goal is basically to replace the mainframe, eventually turn off the main frame and implement. Go live on a distributed ledger platform inside of DTCC as a phase one. Replacing the mainframe but keeping all of the existing interfaces so that it's transparent to the industry.
Firms can continue to submit, receive trade and receive outputs, and regulators can continue to their outputs at the same way. Future phases are going to allow clients take down notes, and DTCC to really set up a governance's model that will allow us to be the adult in the room and make sure that the ledger is operating properly, with integrity that the right permissions and membership rules are being heard too, if anything is going wrong in the network, we can isolate it and stop that problem. And that there somebody ultimately responsible for the performance, and integrity, and ownership of that network, so that's we are doing.
We believe that it will bring a lot of optimisation, simplicity and efficiencies that will lower their costs; it will lower risks to the industry. We'll have a distributed shared ledger so everyone will have a shared data. The same rule associated with that data, the same way of interpreting that data. They won't need to create their own stacks of information. We'll be able to provide regulators with their own notes so they will be able to have the data brought to them in a real-time manner. And we won't require every single participant to create their own set of reports for the regulators; we'll able to provide that efficiency to the entire industry.Categories: Financial Technology, Innovation, Technology & Operations, Trading & Data, Transaction Banking