Information Technology

The Impact of Data Centers on Wall Street and the Financial Sector

The mobility of data is the financial services industry’s lifeblood. That data must travel quickly and be safely preserved. The financial industry is grappling with a rising number of data to handle, whether for trading reasons or through the use of cybersecurity software that analyzes data for probable instances of fraud or noncompliance.

As a result, the financial services industry’s reliance on data has an immediate and long-term influence on the secure data center business. Here’s a look at the various ways Wall Street and the financial sector rely on data centers, as well as the growth of that connection.

Demand is driven by electronic trading.

The financial sector’s usage of data centers has been influenced significantly by the transition to electronic trading. It has enhanced access to financial market data, allowing anybody with an Internet connection to trade stocks. Trading occurs all over the world, and data centers must accommodate the demand while while delivering constant performance.

As Wall Street businesses adopted high-frequency trading (HFT), a sophisticated kind of computer-driven data analysis that includes capitalizing on minute swings in market activity, the role of IT infrastructure rose. Traders employ software to sift through data and perform automatic moves based on the conditions. It is feasible to obtain a competitive edge by seeing developments a few milliseconds before other traders. In the fast-paced world of high-frequency trading, such short periods of time may make a significant impact.

Proximity hosting is a sort of colocation that allows traders to be physically adjacent to the IT systems where trades are made while also benefiting from numerous data flows. The rise of HFT and proximity colocation coincides with a massive increase in data traffic, albeit this has lately tapered off.

Data Centers Assist in Meeting Compliance Obligations

The banking business, like the medical sector, must follow rules that govern the handling of data and other processes. As of March 2017, financial organizations, for example, were required to comply with cybersecurity regulations by conducting risk assessments and maintaining risk-based cybersecurity strategies. In many situations, this entails utilizing platforms that gather and analyze data before issuing alerts about possible risks.

In addition, various regulatory bodies address the financial sector’s aim to introduce additional security measures in the near future. To remain compliant, financial institutions must be aware of cybersecurity dangers and the data breaches they may cause.

Data centers may gather security-related data, but they can help with compliance in other ways. Cloud computing may gather data through logging and then store it for a specified period of time. The location of the data center is also important since local rules require that information remain within the country’s boundaries.

Data centers can also help with data access and classification for subsequent, more easy sorting. Many facilities throughout the world can replicate workloads in the case of data loss, shortening the time it takes to complete data recovery after failure. All of these characteristics, taken together, arguably make compliance easier to achieve than it was before such data center technology existed.

The Impact of 9/11 on the Data Center Landscape

The financial industry in New York accounts for more than 39% of overall economic production. In Manhattan, data centers are largely responsible for keeping up with the financial sector’s demand. Several developments, however, compelled New York’s data center sector to expand and widen in relation to the financial world.

Following the terrorist attacks on September 11, 2001, which demolished the World Trade Center in Manhattan, financial services businesses relocated their data centers outside of New York City. Initially, many businesses were located in Manhattan or Brooklyn. However, following the events of 9/11, banking officials urged those firms to relocate outside of the city.

They did so in the name of “geographic diversity,” claiming that shifting outside of the city to a new site, such as one in New Jersey, would place those financial firms out of harm’s way if fresh assaults occurred. This aided the establishment of a wholesale data center industry in Central New Jersey, which is still active today.

When Superstorm Sandy ravaged the East Coast in late October 2012, data centers were relocated in a similar manner. These weather disasters caused issues for data centers, particularly when it became essential to relocate IT equipment out of lower Manhattan’s flood-prone zones.

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