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1 WFE MIT Forum Comparisons of ATS systems with those of traditional Stock Exchanges Trading Technology November 2009.

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Presentation on theme: "1 WFE MIT Forum Comparisons of ATS systems with those of traditional Stock Exchanges Trading Technology November 2009."— Presentation transcript:

1 1 WFE MIT Forum Comparisons of ATS systems with those of traditional Stock Exchanges Trading Technology November 2009

2 2 AGENDA The new exchange participants Architectural Differences ATS system architecture Challenges to the industry

3 The participants

4 4 Industry Trends – exchange participants Global brokers Simple connections, FIX Routing networks Co-location Cheapness Product expansion Commodities, Derivative, ETFs. Local Brokers No changes Cost reduction Simplicity Algo Traders: Cheap Fast High volume/low latency Co-location Simple market structures Out of hours trading Not afraid of technology!

5 5 Industry Trends – effect on execution centres In 2003 trend was BCR centric – resilience and recovery key High degree of functionality – derivatives, ETFs etc Multi-asset/functionality systems Scalability – Moores law kept up with increase in business In 2009 trend is Low latency Performance High order to trade ratio Competitive costs – low overheads

6 Architectural differences

7 Industry Trends – Architectural Types 7 TT has identified four major types of architecture for exchange trading systems. Type 1.Mainframe/minicomputer centralised trading system 2.Distributed multi-server resilient system 3.Simple (simplex) trading system with few or no resiliency components 4.Web/windows component systems These are generally in order of chronological development There is no judgment as to which is better or worse The packages such as CLICK, X-STREAM and SAXESS are type 2 The ATSs tend to be a type 3, which has emerged as the highest performance system due to its simplicity

8 8 8 Typical Type 2 system architecture

9 9 9 Typical ATS system architecture

10 10 Speed = simplicity...

11 11 Industry Trends – Trading systems ATS model – simple systems Designed for speed first, resiliency second Sacrifice resiliency components for speed Reliant on more stable platforms HP x86 Blade servers Clustering Disk RAID/SAN resiliency Use of Multicast core to architecture Use of native protocols plus ITCH OUCH Standardised on C++, RedHat Linux, Open source components, MYSQL or Oracle Offer Co-location

12 Trading system latency Note these are published latency figures Beware lies, damned lies and Exchange statistics! Beware also that all technology providers will claim sub nano-second latency... ASX is spending money on upgrading ITS BATS and Chi-X will not be standing still on latency Will Latency matter once all venues are under 1ms?

13 13 6. Effect on the industry?

14 14 List of top 25 Exchanges*/ATSs using ATS systems RankExchange/ATSValue Traded (2008) $m Trading SystemUse of consultant / SI 1NASDAQ OMX (US)36,446,548.50In-house(ex ATS) 2NYSE Euronext (US)33,638,937.00In-house(ex ATS) 3BATS (US)7,800,000.00In-house(ex ATS) 4London Stock Exchange6,473,611.60In-house / outsourceAccenture 5Tokyo Stock Exchange5,586,327.10In-house / outsourceFujitsu 6Deutsche Borse4,724,486.10In-houseAccenture 7NYSE Euronext (FR)4,454,415.20In-house (ex-ATS) 8DirectEdge (US)3,800,000.00In-house (ATS) 9Shanghai Stock Exchange2,586,680.60Package (Xetra)Accenture 10BME (Spain)2,438,646.50In-houseBME Consulting 11Toronto Stock Exchange1,736,084.90In-house 12HK Exchanges1,629,259.90In-houseCompaq 13Borsa Italiana1,526,237.20ASP (LSE)Accenture 14Swiss Stock Exchange1,509,899.60Package (OMX) 15Korean Stock Exchange1,458,516.60In-houseIBM 16Stockholmbörsen1,354,243.70In-house (OMX)OMX 17Australian Stock Exchange1,258,769.00Package (OMX)OMX 18Shenzhen Stock Exchange1,241,747.40In-house 19Taiwan Stock Exchange837,774.60In-house 20BM&FBOVESPA750,250.50Package (AEMS)AEMS 21National Stock Exchange of India740,901.50Package (TCAM)Tata Consulting 22American Stock Exchange561,602.50In-houseSIAC 23Tadawul (Saudi Arabia)523,450.00Package (OMX)OMX 24Oslo Børs458,078.40ASP (OMX)OMX 25JSE Securities Exchange400,758.40ASP (LSE)Accenture *WFE Statistics 2008 (with ATSs researched independently)

15 15 Industry Trends – effect on execution centres Added together, 86% of business in the top 25 exchanges goes through an ECN-style system

16 16 Industry Trends – Effect on execution centres In a theoretical world, and with routing, with all exchanges offerings being equal, market share will tend towards 25% (if there are four participants) Starbucks comparison Thus the market will become saturated...

17 Industry Trends – Business Strategy Saturated market competition mode is thus Minimal overheads Maximum automation Maximum business throughput Possible cross-subsidy of main business streams (e.g. listings and market data to subsidise trading) IT a core role Needs to be minimal 17

18 18 6. Conclusions

19 19 Summary – future state architecture? Has the time between trading system redevelopment shrunk? Used to be 10 years Designed for speed first, resiliency second Fewer resiliency components – be brave! Use of Multicast core to architecture Use of native protocols plus ITCH OUCH Standardised on C++, RedHat Linux, Open source components, MYSQL or Oracle Offer Co-location


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