A few years back, in my days as an old fashioned paper publisher, I was at the Frankfurt Bookfair when a colleague in the legal publishing world proudly announced that one of his books had won the prestigious Oddest Title of the Year award, with a best-selling volume called ‘Reusing Old Graves’*. At the seminar on 9 November I hit upon the next title in that series, ‘Reusing Old Bunkers’.
For this was a seminar that started with the audience gazing up at the cloud (though some clouds are for private view only) and ended up with us rummaging around in converted nuclear bunkers, trying to keep the power on.
Philip Davies of Deutsche Bank and Paul Shields of Microsoft started the journey by looking at some of the specific issues that the financial services industry must look out for when considering whether to use cloud computing models as part of their IT provision. There was much discussion on the immense amount of regulation involved: apparently, there are 400 regulators that need to be satisfied in one way or another on security, data protection and other issues if a global bank wants to park some of its IT provision on what Philip wryly described, in contrast to off shore, as the ‘not shore’. Such hurdles are obviously a drag on any rapid transfer to cloud computing models and there was also debate about whether cloud models can provide the 99.99% reliability that those such as currency traders demand. Paul Shields, from the supplier side, said that the proof would be in their performance. Microsoft have made a big leap to the cloud model, with the development of a platform called Azure, and Paul emphasised that the suppliers know a thing or two about data security. A small ripple of surprise went round the room when he said that a big bank had already signed up with them. Whether this is a public, private or hybrid cloud solution and on a standard ‘as is ‘ contract, other major points of debate in the session, remains to be seen.
A tour of the copyright issues in trading data then brought us back to Earth. Martin Lau of Tradition, a global inter dealer broker, and Martin O’Conor of DLA Piper surveyed the commercial realities of data licensing, the increase in the number of exchanges providing feeds and the use of brand names and trademarks in derivative products. They set out three themes underlying the development of the law in this area: harmonisation, decent protection for the database providers and fair protection for users. The key message seemed to be that concrete definitions for licensing and provision of trading data are hard to find, so the safe approach is to look at each stage of the process and see what permissions and rights are required. It was also noted that the charges for non-display data, that is data used in black-box trading where it is not displayed on a screen, can be sometimes be licensed on different terms. Unsurprisingly, with all these variations, the concept of a consolidated EU approach is on the agenda, which some say is the only way forward. Equally unsurprisingly, no firm time line has been set.
Yet some of this trading data is now being swapped within an exchange’s data centres. Christian Bartsch of Bird & Bird informed us of the latest moves by exchanges, including the LSE and the NYSE, to allow financial services companies to use server space in their own data centres in co-location deals. Christian described this as ‘the best seat in the house’ as co-location reduces latency in transaction trading time. In an era of ever increasing trading flows and increased use of black box trading, reducing any delay is considered critical. He then gave a run-down of some of the issues to look out for in negotiating such deals, such as what happens in a disaster situation to ensure that the plan is fair to all participants and ensuring that the insurance matches the often rigorous requirements of the co-location data centre.
Finally we descended into the bunker with a presentation from Steve Gooding of The Bunker. The company owns two military-grade nuclear bunkers that have been converted into data centres where they provide, simply put, rack space, power, cooling and physical security. Improvements in data transmission speed mean that they are moving from providing disaster recovery services to hosted applications, with data being moved out of London, where power costs and the perceived terrorism risks can add to the hosting bill. This is a trend that will continue as everything, as ever, comes down to cost in the end.
With so many legal loose-ends and the ever more important role that IT has in the financial services sector, it seems unlikely that this will be the last such seminar on this topic.
David Chaplin is an SCL member and director of Bath Publishing, online law publishers.
*anyone with an idle moment and in need of a laugh, should take a look at the list of winners on Wikipedia
