By Matt Barrett, CEO and Co-founder, Adaptive
Whether establishing a new exchange or upgrading legacy exchange technology, the approach firms choose needs to meet both current demands and adapt to future challenges.
In today’s market, firms are often faced with a binary choice – purchase a turnkey solution from traditional exchange technology vendors, or build their own.
Purchasing boxed solutions allows firms to get started quickly, reducing time to market and offering services to clients promptly. On the other hand, limitations quickly transpire when it comes to customization or innovation at pace.
Firms can find themselves constrained to the vendor’s product roadmap, limiting their ability to steer the pace and direction of innovation. They are also often required to roll-out upgrades and updates which may not always align with their internal timelines.
Turnkey solutions can also mean that market participants, such as exchanges, brokers, or market makers, are building their businesses on indistinguishable infrastructure, with various market players running on the same technology stack. This raises the question of how firms can differentiate and maintain a competitive edge as they grow and expand.
Differentiation, control over source code, and freedom to innovate at pace are all critical for these firms in the long term.
A blended approach to exchange and matching engine technology presents a solution to this problem. For firms looking to enter the market quickly while maintaining the benefits of differentiated, competitive technology stacks, one approach may be to buy the core, underlying technology, whilst also gaining access to the source code and thus having the freedom to customize and build upon the existing feature set to differentiate. This allows firms to be fast and agile at the start line, by buying a set of core trading features such as order handling, validation, risk management and connectivity components, all of which also need to meet the highest performance requirements including low latency, high throughput, and reliable uptime.
This significantly speeds up the build process with less internal resources required. It also de-risks the process of creating differentiated tech and grants firms the right to make modifications to the underlying source code, rather than running their operation on a proprietary, closed, and highly prescriptive matching engine that remains under vendor control.
To remain competitive, firms need to have full control over their technology. Differentiation across exchanges, of instance, is a valuable asset to markets, providing customers with choice and allowing firms to evolve among healthy competition.
Further, this ownership ensures that exchanges have complete control over their product roadmap and the freedom to innovate independently. With no vendor lock-in, clients can evolve their tech stack as they desire over time. As regulatory scrutiny over vendor usage and lock-in increases, most notably with DORA applying to firms operating in the EU as of 2025, this becomes an increasingly crucial consideration for firms looking to establish a new exchange or upgrade legacy technology..
As market conditions rapidly change, true ownership allows firms to future proof their operations. For example, with the cloud migration ongoing, owning IP and being able to access source code means firms can rapidly adapt their deployment models – whether that be cloud, hybrid, or on-premises – unencumbered by vendor timelines and abilities.
Ultimately, empowerment and innovation is at the core of the debate. For firms looking to enter the market quickly, or newer market entrants with fewer resources, turnkey solutions provide a time- and cost-efficient approach. However, for those looking to become long term, highly competitive, differentiated players, looking at new models of technology deployment is key.
