Open Source: Winning Over the Financial Services Industry #IndustryFinance

Multiple trends contribute to the growing support for and adoption of open source in the financial services industry, as witnessed at this year’s FINOS Open Source Forum here.

The FinTech Open Source Foundation (FINOS), which is part of the Linux Foundation, hosted the event, attracting a record number of attendees.

In his opening remarks, FINOS Executive Director Gabriele Columbro noted that membership is up 30% and contributions are up 24% year over year. FINOS now has 95 members, he said as he announced new members Nvidia, Protect AI, State Street, JUXT, and Temporal.

The open source technology behind GenAI is a big driving force for the increased participation, new membership, and new projects, he added, noting contributions from Nvidia and Protect AI in particular.

Several presenters, including the keynote by open source advocate Kelsey Hightower, stressed the broad benefit of open source collaboration — whether developing software, standardizing internal processes, or simply exchanging ideas with colleagues across organizations.

Financial services companies are looking to open source to cut costs and free up funds for innovation. And not just software, but also open source-style collaboration on defining internal processes and workflows.

Two popular FINOS projects, the Financial Desktop Connectivity and Collaboration Consortium (FDC3) and Common Domain Model (CDM), are flexible integration standards with open source components for common interfaces and data models.

Exploding FDC3 Adoption

Open sourcing FDC3 is one of the first projects FINOS initiated. The “exponential adoption of FDC3 provides tangible validation of the value of FINOS to the industry, wrote Columbro in a post following the event. 

BlackRock and Morgan Stanley announced conformance to the standard at the conference alongside statements of adoption from FactSet, LSEG (London Stock Exchange Group) and State Street.

The FDC3 standard integrates desktop financial services applications, offering an alternative to proprietary solutions that improve trader productivity.

FDC3 defines standard “intents” (or events) and their associated context data for communication among internal applications such as research, chat, portfolio management, chart, and market data, as well as for communication across external trading partners in other organizations. FDC3 is designed to reduce overall friction in completing trading workflows.

Intents enable real-time data propagation across financial applications. For example, when a stock trader inputs the stock symbol “IBM” in a market data application, FDC3 intents trigger related displays of IBM data in the portfolio management, chart, and internal research application on the financial desktop.

“FDC3 is fundamentally simple,” Julianna Langston, senior software engineer at interop.io told The New Stack. “It’s a small amount of JSON shared between applications, and we all agree on what that JSON means.”

Moreover, “that simplicity is what grabs people, especially developers. People appreciate having a consistent standard that they can leverage between a variety of applications, rather than having to learn separate APIs for each app they want to work with,” she added.

FINOS said a web version is scheduled for the next release.

The Next Big FINOS Thing: The Common Domain Model

The CDM is quickly becoming FINOS’s next most adopted standard. The CDM defines the event and data models for financial product trading and processing.

Like FDC3, the CDM is not a complete application but a standard with an associated set of event definitions and data models that can be used to build compatible applications.

Organizations following the CDM improve interoperability and reduce data transformation and mapping costs — internally as well as externally.

“I always talk about a future Nirvana state,” FINOS COO Jane Gavronsky told The New Stack. “When all of your internal data is compatible and flows easily and quickly from application to application, both inside the company and externally. That’s our ultimate goal with the CDM.”

Standardizing events and data across an organization benefits productivity, lowers costs, and helps regulatory reviews run smoothly.

Currently each party to a trade, stores and manipulates their own definition of the data and processes the trade lifecycle in their own way. Using the CDM standardizes counterparty interactions and data models, promoting transparency, efficiency, and innovation.

The adoption of CDM will speed up the development of new solutions for the market by allowing providers to focus on what they specialize in rather than requiring them to interpret and represent market events and processes individually

Conference attendees cited a reason to join FINOS was their interest in using the open source collaboration approach to resolve other operational inefficiencies similar to the one CDM resolves, and free funds for innovation.

Kelsey Hightower’s Keynote

In his conference keynote, open source advocate Kelsey Hightower inspired the audience to contribute to FINOS by tracing his own career path, emphasizing the power of ideas and contributions, and introducing organizational change.

He advised attendees to lead with the value of technology and cultivate a culture of learning and execution. It starts with contributing, he said. Innovation with the open source approach can lead to career growth opportunities, he added.

“Open source software is the story I just told you” (about his career path), he said. “It’s easy to predict the future when you’re working on it. That’s the opportunity you have in front of you.

“A lot of us want the new technology to work the old way,” he said. “Participate even at the idea stage. Do not prevent people from trying something new.”

Show Me the Data: the FINOS 2024 Survey

FINOS and the Linux Foundation surveys the financial services community every year to gauge open source adoption and key challenges.

The authors of the report discussed the results of the survey at the conference, including Tosha Ellison, strategic advisor at FINOS, Colin Eberhardt, CTO Scott Logic, Hillary Carter, SVP Linux Foundation, and Cara Delia, senior principal community architect at Red Hat.

The 2024 survey indicates 88% of respondents are using OSS and realizing benefits from doing so, said Ellison.

A majority of respondents said they benefited from working with others on the project who knew what they were talking about (i.e., the benefit of community participation).

However more OSS councils are needed to ensure security checks are done. It’s more costly if you don’t find the problem in advance, Ellison added.

Eberhardt noted that GitHub contributions are up 26%, with 46% of organizations responding saying they are allocating more time to OSS contributions.

“They influence the projects by making a contribution, which is a different way of interacting with a third party than banks are used to,” he noted. The report shows the needle is moving in the right direction.

Meanwhile, innersource (i.e. managing internal projects as open source projects) can be a good initial step toward open source, said Delia.

The report shows 88% of respondents are doing innersource, which provides a way to be able to create change management and get stakeholders together and determine value and learn how to mitigate the risk of IP and data leakage.

The report also shows that AI/ML is considered very important for the future (and a big driver for interest in OSS), said Eberhardt. The biggest challenge is adopting external AI and getting permission to start making use of it for legal reasons, security, and more.

Eberhardt said AI and cybersecurity are the two top areas for contributions, and cloud and containers are the two top areas for OSS adoption (presumably after operating systems since it wasn’t on the list).

What FINOS Offers: Red Hat’s Perspective

Aric Rosenbaum, chief technologist for Financial Services at Red Hat, told The New Stack that FINOS is “where our clients are meeting and collaborating to collectively solve problems for the industry.”

Red Hat is a Gold Sponsor and Rosenbaum is a member of the FINOS Governing Board. Red Hat also contributes to multiple FINOS projects, Rosenbaum said. He also noted that he sees OSS adoption growing and contributions starting to open up as banks gain confidence.

FINOS provides training, an OSS maturity model, various case studies, and a Slack channel to help members who are just getting started.

They help members submit contributions, collaborate with other members, and navigate the legal and practical considerations of open source collaboration and contribution, all of which Red Hat actively supports.

The growing interest in FINOS appears to be stimulated as much, if not more, by opportunities to share ideas and standardize internal processes as it is for the opportunity to develop low-cost common software solutions, Rosenbaum confirmed.

Red Hat “helps FINOS pave the way for financial services organizations to adopt open source,” Rosenbaum said, “in helping them understand how to innovate in AI, for example, and capture the innovation inherent in open source software projects generally.”

He added that FINOS helps financial services organizations learn from other organizations and “holds your hand on the OSS journey.”

Common Cloud Controls and More: GitLab Perspective

GitLab actively participates in FINOS, providing thought leadership and contributing to multiple projects, such as common cloud controls, DevOps automation, and supply chain security, Lee Faus, GitLab’s global field CTO told The New Stack.

Faus said he contributes on an ad hoc basis to FINOS projects whenever the perspective of GitLab is beneficial for topics like DevOps, security best practices, and cloud adoption.

Faus highlighted GitLab’s participation in the Common Cloud Controls (CCC) project and described its potential to abstract cloud provider services and streamline cloud adoption and application migration across providers.

CCC currently standardizes on Terraform templates, but Faus said he sees value in a more robust orchestration model he calls “software logistics” that is more holistic around provisioning, configuring, securing, and overall change management using Petri Nets instead of directed acyclic graph (DAG).

“The original concept was regulatory review preparation, e.g. if a financial services company uses Azure securely, they have to certify each individual service to the regulators, and CCC wanted to help with that,” he said.

But regulators are also concerned about lock-in to a particular cloud provider, Faus noted. Being able to abstract away the services would help.

“For example, instead of using a specific Terraform template for EKS on AWS, it would be able to abstract to Kubernetes generally and create a template based on that specific cloud provider using a control plane model.”

This type of abstraction is a future work item for CCC and is currently being discussed throughout the FINOS community, he said.

Vendor Support for FINOS

Conference sponsors set up booths in the exhibit hall to explain the benefits of their open source products and services for financial services customers and showcase their financial services solutions. This supports the FINOS goal of promoting open source adoption.

Several of the conference exhibitors also contribute to FINOS projects, which supports the organization’s goal of developing open source software and standards to meet specific requirements of the financial services industry.

For example, interop.io hosted a demo of FDC3 at their booth, to which they have been contributing for the last few years.

Software supply chain management company Sonatype contributes to the Common Cloud Controls project and assists with software composition analysis (SCA) considerations for conformance to the European Digital Operational Resilience Act (DORA), in conjunction with the FINOS Morphir project.

Consulting and bi-temporal database company JUXT, one of this year’s new members, is contributing to the TraderX project, adding the bitemporal data use case.

Cybersecurity consulting and advisory company ControlPlane is contributing to multiple FINOS projects, the AI Readiness SIG, Common Cloud Controls, and Compliant Financial Infrastructure projects.

And compliance monitoring and security controls vendor Compliance Cow also contributes to the Common Cloud Controls project.

Eric Newcomer is CTO at Intellyx. He has served as CTO for leading integration vendors WSO2 and IONA Technologies and as Chief Architect for major enterprises such as Citibank and Credit Suisse. He has created some of the best-known industry…

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