COMPUTERSHARE MARKETS TECHNOLOGY
market, hidden quantity, stop, market maker)
that should be taken into consideration in
ranking the market flexibility of the competing
systems.
Product Flexibility
Different products place different demands on
the architecture of Exchange Trading Systems.
This is particularly true when it comes to
derivative securities, where the nature of the
market means that capacity, performance and
connectivity combine with the inherently complex
functionality they require to demand the most
flexible and powerful systems. However,
efficiency demands that the same system that
trades complex derivatives should still be able to
handle the full range of products, from the
primary auction of sovereign and corporate debt
securities, through normal automatic matching
limit order books, up to complex strategy
securities derived from futures and options that,
in turn, may be based on the underlying physical
that is also listed on the same system. In the
case of a diversified exchange, the underlying
market may be elsewhere and the systems of
such an exchange should be able to take the
price feeds from those external markets and use
them internally to help manage the orderly
operation of the derivate securities based on
those underlying markets.
The huge advantage of being able to offer all the
products in the chain within the one system is
that it enables the exchange to offer contingent
trading amongst underlying securities and their
derivative or hedge securities to offset the risk in
the original trade. This contingent trading is a
key feature of the advanced Exchange Trading
Systems that will empower the most
sophisticated and risk managed of trading
solutions. Because of the nature of these
markets there is a huge benefit derived from
offering strategy trading, such a spreads, on
these securities. These securities help to spread
the liquidity available in the market and facilitate
the moving into and out of hedge positions for
the underlying trading activity in the system. It is
only when the Trading System itself implements
the fully implied chains of orders from the
outright orders in the system, without any
legging risk that the full extent of a markets
liquidity can be exposed to help the users of the
system find “best price”.
Operational Flexibility
Market and Product flexibility is pretty much
useless if the system that implements them
does not have the operational flexibility to
schedule the different markets and products to
operate at the right times, and in the right
combinations, to provide the exchange with the
environment to ensure that full price discovery is
available to all its customers.
Operational Flexibility is not just about ensuring
that the trading calendar proceeds smoothly, but
that the exchange has the ability to alter that
calendar or schedule new activities on and add
hoc basis to respond to movements in their
markets or the underlying markets on which their
diversified markets are based. Further, the
functionality and information contained within the
system must be available to the customers of
the exchange and the modern way of doing this
is to ensure a rich set of API based on industry
standards to allow third parties to develop their
own client applications or use those provided by
the system vendor to actually do the trading on
which all exchanges are dependent.
SCALABILITY
We have seen the kind of flexibility that is critical
to the success of an exchange, particularly an
emerging market, but perhaps even more critical
is the ability to scale the performance of the
system to meet the growth in activity of the
exchange. By almost any definition, activity
growth is the most important means by which a
market can move from being in the emerging
category to establish itself in the global capital
markets. A system that cannot match that
growth without requiring enhancement is a
barrier to the cost effective emergence of a
market into the community of established
markets.
CONNECTIVITY
Finally, software that brings together the twin
enabling features of flexibility and scalability is
best built upon the foundation of an
infrastructure of open standards on open
platforms, reliability and ease of management,
tied to an approach to connectivity that allows
the exchange to present a diverse range of
interfaces using global standards such as FIX,
XML and ODBC delivered over the industry
standard TCP/IP networking framework that will
scale from a exchange based local area network
to a national, regional or global wide area
network.
SUMMARY
We have seen that all markets are presented
with certain challenges with respect to the
Exchange Trading Systems they implement and
that emerging markets in particular have huge
benefits to be gained by considering the twin
elements of flexibility and scalability as critical
factors in selecting the Exchange Trading
Systems that will sit at the core of their business,
empowering their growth and emergence as
established markets on the global stage.
*Galper J, “Three Business Models for the Stock
Exchange Industry, A Working Paper” (1999),
FIBV
ABOUT COMPUTERSHARE MARKETS
TECHNOLOGY
Computershare Markets Technology is the
world’s largest provider of Exchange Trading
Systems. This includes a history of providing
systems to both established and emerging
markets. We offer an integrated suite of trading,
surveillance and back-office products designed
to meet the diverse needs of brokers,
institutions, exchanges and market organizers
around the world. Our advanced financial
markets systems are flexible, scalable and use
the latest, proven and open technology to
ensure reliability, performance and accessibility.
Currently powering more than 45 exchanges,
market regulators, clearing, settlement and
depository organisation worldwide, our solutions
enable markets and exchanges to swiftly realize
the efficiencies, enhanced accuracy and added
functionality achievable through process
automation and technological efficiency.
thousands of users. With its rich functionality
and more than ten years of research and
development, Computershare X-stream
provides;
• Reduced cost and ease of operation through
a fully integrated trading platform—equities,
debt, futures, options, swaps, derivatives—on
a single, robust platform
• Cost effective and rapid time to market for
new business functionality through the
extensive use of plug-in software libraries
• The ability to offer a broad range of strategy
trading including spreads, butterflies and other
multi-leg orders
• The ability to adapt market structures to the
changing demands of market participants with
support for order and quote driven markets
and manual or automated matching
• Decreased hardware costs through
exceptional software performance with
processing rates of several thousand orders
per second and exceptional response times
• Improved competitiveness by offering
several connectivity options such as FIX, XML
and an open API, as well as support for
proprietary messaging systems
Powerful Features
Customisable Plug-in Function Categories
• Order book structure and validation
• Matching and allocation algorithms
• Strategy pricing, ratio, maturity and strike
price
• Yield, fee, interest, tax and commission
calculations
• Data dissemination
Changeable Business Rule Parameters
• Market structure model (e.g., short selling,
cross trading, negotiated deals, order types
and price, size or tick limits)
• Trading controls (e.g., circuit breakers,
trading calendar, event scheduling)
• Market making model
• Order validation, manipulation and matching
rules
• Permissions (e.g., trading access and data
visibility)
Tradable Product Classes
• Price based (e.g., equities, commodities and
warrants)
• Yield based (e.g., bills and bonds)
• Derivatives (e.g., index futures, futures,
options and swaps)
• Strategies (e.g., spreads, butterflies and
custom strategies)
COMPUTERSHARE X-STREAM
Computershare X-stream is natural choice for
emerging markets. Hugely scalable, it can
handle tens of thousands of securities and
thousands of order updates per second from
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