Google, a subsidiary of Alphabet, has invested $1 billion in futures-exchange behemoth CME Group and agreed to move the company's main trading systems to the cloud.
The internet behemoth's Google Cloud business would eventually power exchanges that handle trillions of dollars in deals every day under the terms of the agreement.
The businesses announced a 10-year cooperation on Thursday that will help CME to bring on new users faster, streamline operations, and develop new tools with Google technology, such as artificial intelligence algorithms for monitoring market risks.
Companies that use cloud computing outsource computer processing and data storage to technology businesses rather than running such systems themselves.
Amazon, Google, and Microsoft have been jockeying for dominance in the financial-services sector, which has been slower to adopt cloud computing than other businesses. The hesitation arises in part from the strict regulatory control of banks and exchanges, as well as fears about sensitive client data breaches.
The CME agreement gives Google Cloud a valuable client in the sector. CME is the world's most valuable exchange operator, with a market value of $79.2 billion, a position it just recaptured from Hong Kong Exchanges & Clearing. The Chicago-based firm operates a wide range of markets, from crude oil to gold to stock market futures.
According to Gartner, Google Cloud is the fourth-largest cloud provider, accounting for 6.1 % of global cloud-infrastructure revenues last year.
According to Gartner data, the largest participant is Amazon, which had a market share of more than 40% last year, followed by Microsoft and Alibaba Group Holding.
Google made a $1 billion equity investment in nonvoting convertible preferred CME Group stock in addition to the cloud deal, the firms announced. Google Cloud Chief Executive Thomas Kurian described the investment as "a reflection of our commitment to the transformation of the financial system, not just to one company's infrastructure" in an interview.
Moving CME's trading systems to the cloud will provide more technological obstacles than a normal corporate cloud project.
CME exchanges handle a large volume of price quotes and trades, many of which are provided by high-speed trading businesses used to having the exchanges' systems process orders in millionths of a second. And if an exchange goes down, it is more than simply an inconvenience; it can have repercussions throughout the financial markets.
Despite these challenges, exchanges have begun to dabble in cloud technologies.
Nasdaq announced last year that it intended to migrate its markets to the cloud over the next decade. The New York-based corporation has not yet decided on a technology provider.
Amazon is also interested in the exchange business. Amazon Web Services, the tech giant's cloud-computing branch, launched a trial project last year with Singapore Exchange. and European market operator Aquis Exchange PLC to demonstrate that it was possible to run an exchange capable of managing ultrafast, high-volume trading using AWS technology.
According to the firms, CME will begin migrating its IT infrastructure to Google Cloud next year. Initially, the businesses intend to concentrate on CME's data and clearing services, which are not as time-sensitive as the core trading systems. "Clearing" is the behind-the-scenes process of settling transactions and transferring funds between market participants following trades. Eventually, the proposal aims for all of CME's markets to be moved to the cloud.
"I wanted to be under a technology umbrella with the bandwidth to allow me to grow my business," CME Chairman and CEO Terrence Duffy explained in an interview. "Myself and my team are both adept at transactional commerce. Google is extremely knowledgeable about technology. "I believe it's a match made in heaven."