As Financial Extranets Enter Their Third Decade, Here Are 10 Predictions for 2020
By: Chris Swan
The financial services community is arguably the most connected industry in the world, with the largest IT and telecom spend and the most to gain or lose when the performance and security of networks is in play.
We first saw the Extranet model surface back in the 1990s when the Internet, which was largely used by the academic, government and research communities, entered into more commercial territory and made new ways to connect, communicate, trade, settle, make payments and otherwise conduct financial transactions easier to do.
The Internet was at that time and remains today the largest, most pervasive, resilient and efficient network in the world, and while the “Arpanet-inspired” early version is dwarfed by the size of today’s Internet, it could not be ignored.
Innovators and investors jumped on board and created new business, not just technical models, and simply by doing the math, banks and other financial institutions and the suppliers serving them recognized the Internet Protocol along with a network already funded and in place opened up what felt like limitless possibilities.
Telecom companies scrambled to respond and began working with the financial industry to build new access networks making it possible to connect to the Internet and begin replacing “pinned down circuits” and other physically connected end-to-end networks with Internet protocol versions, as “virtualized” networking was born. It wasn’t easy – it took a huge amount of collaboration and investment in all layers of the OSI stack, including installing millions of miles of fiber optic cables, on land and under the sea – but the economics were too compelling to ignore.
The first Extranet was built by a company based in NYC, IXnet, which combined with IPC, a voice trading “turret” supplier connecting thousands of banks, and hundreds of thousands of traders who were using voice to broker equity, options, futures, commodities, currencies and more. This came at a time with electronic trading systems were disrupting incumbent, traditional exchanges – Nasdaq for example was born into immediate greatness.
Competitors to IXnet rose up quickly, with companies based in the UK, Asia Pacific and others in the US, all driven by a similar purpose: to support liquidity in an increasingly fragmented capital markets arena.
Financial extranets have become a fundamental component of the business done by buy-side and sell-side firms, providing access to a service or liquidity pool no matter where it is hosted. In cases where the network provider has a point of presence in a data center and provides connectivity between multiple data center, banks and their market data and news providers, for example, can take advantage of that infrastructure to have one integrated and centrally managed connectivity solution.
Extranets are poised for even more growth in 2020 and this explosive decade as more and more services are being digitized.
For example, Dispersive is extremely proud to support a relatively new Extranet company, cleverDome, written about a few years ago:
Performance: Dispersive combines its dynamic, split-session multi-path routing across one or more physical circuits with simultaneous, multivariate QoE and optimization schemes. Since each session is split, all available connections can use broadband, WiFi, 4G/5G, etc. You get increased throughput by being able to optimally use any connection, especially when more than one is available, as the software treats all of the connections as one logical pipe. When performance issues are detected, these independent streams instantly adapt, adjust, and automatically roll to new paths to improve application performance.
Security: As user sessions are split and independent paths are selected, each packet stream is encrypted with a unique FIPS 140-2 compliant key and each stream is sent on a different path to thwart man-in-the-middle attacks. As an overlay solution, it obscures the original source and destination for each session and stream, shifting potential attacks away from the end customer. Additionally, by rolling away from problems, the solution is able to defeat DoS and DDoS attacks. The software authenticates users before providing access and can micro-segment networks by the user, port, protocol and application. Finally, Dispersive listens for connections and any unexpected or outside connections are silently denied, by default.
Dispersive continues to innovate in ways that fundamentally improve the way financial Extranets deliver quality of service with private networks that tame the public Internet and are faster and more secure than ever before.
Here are ten predictions for 2020 in the world of financial Extranets based on what we are experiencing, discussing with our clients and partners, and continuing to develop in our labs:
- Best efforts will no longer good enough, and next generation Extranets will have to be not just “near real time” but “real time” taking speed to the millisecond
- More fiber will be required to support ultra-low-latency applications including algo trading
- Regulators will continue to tighten rules regarding fairness so visibility into the transactions occurring on Extranets will drive increasingly sophisticated monitoring and management capabilities
- Security will become more important as cyberattacks become more sophisticated including those launched by adversarial, well-organized entities, many who are spending more on figuring out how to attack networks and systems than enterprises according to Gartner
- More collaborative efforts will be established, and new standards set as the benefits of Extranets become even more relevant with the growth of not only trading but payments and other transaction types; competition will blend with cooperation, particularly among trading counterparties
- Mobile applications will change the way more “portable” Extranets will operate, and with 5G being installed in all the major financial hubs, financial professionals will be able to carry with them the same ultra-fast and ultra-secure applications in their pockets
- Cloud processing will be orchestrated to work with more compute at the edge, which will drive the continued growth of “edge data centers” especially in top cities like New York, Boston, Chicago, San Francisco, London, Paris, Tokyo and other centers
- The rise of enterprise blockchain applications for the financial community will drive more and more transactions, but in a less centralized fashion, and Extranets will adapt to support decentralized transaction models
- Extranets will be spun up more quickly than ever, and with more advanced virtualization and cloudification of networking, highly specialized Extranets will grow (connecting certain classes of securities, for example)
- The “cable model” will become more interesting than ever, with multiple services being delivered over single, powerful fiber optic access connections or “big pipes” that are installed twice for the ultimate in availability and performance; thus multiple Extranet applications can be delivered over the same physical infrastructure, whether that is owned by a bank, or cooperatively owned in an IaaS or NaaS approach
Dispersive’s technology is ideal for the next generation of financial Extranets and being leveraged to further advance the value of mission critical and “programmable” networks designed for the Exabyte era. The massive growth of data and storage, the move to cloud and now edge computing, and the new way “digital natives” will work not just in 2020 but in 2030 are pushing the limits again, spurring investment and innovation and contributing to the next level Internet made extra special with new software solutions, session splitting, and security built into the network which is where Dispersive shines.
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Dispersive announced last week it has developed a combined offering with ClearBlade, a pioneer and fast-growing Industrial IoT software and platform company delivering sophisticated connected systems for large enterprises. We’ve been working together in our labs and behind the scenes to bundle ClearBlade’s award-winning and widely deployed IIoT solutions (which support edge, cloud and enterprise systems, big data collection, analytics and real time control systems), to make it easier for customers to benefit from zero-touch commissioning, management, and zero-trust networking.
As Industrial IoT (IIoT) implementations continue to grow at a rapid pace, enterprise organizations, especially those in mission critical realms, are seeking full stack solutions which blend edge computing, cloud computing, and virtual networking that supports more sophisticated and distributed applications.
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