Transcript Industry Trends & Technology Benchmark

WFE MIT Forum
Comparisons of ATS systems with those of traditional
Stock Exchanges
Trading Technology
November 2009
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AGENDA
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The new exchange participants
Architectural Differences
ATS system architecture
Challenges to the industry
1. The participants
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Industry Trends – exchange participants
• Global brokers
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Simple connections, FIX
Routing networks
Co-location
Cheapness
Product expansion
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Commodities, Derivative, ETFs.
• Local Brokers
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No changes
Cost reduction
Simplicity
• Algo Traders:
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Cheap
Fast
High volume/low latency
Co-location
Simple market structures
Out of hours trading
Not afraid of technology!
Industry Trends – effect on execution
centres
• In 2003 trend was
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BCR centric – resilience and recovery key
High degree of functionality – derivatives, ETFs etc
Multi-asset/functionality systems
Scalability – Moore’s law kept up with increase in business
• In 2009 trend is
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Low latency
Performance
High order to trade ratio
Competitive costs – low overheads
1. Architectural differences
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Industry Trends – Architectural Types
• 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
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Typical “Type 2” system architecture
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Typical ATS system architecture
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Speed = simplicity...
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Industry Trends – Trading systems
• ATS model – simple systems
• Designed for speed first, resiliency
second
• Sacrifice resiliency components for speed
• Reliant on more stable platforms
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HP x86 Blade servers
Clustering
Disk RAID/SAN resiliency
• Use of Multicast core to architecture
• Use of native protocols plus ITCH OUCH
• Standardised on
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C++,
RedHat Linux,
Open source components,
MYSQL or Oracle
• Offer Co-location
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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?
Equity Trading System Latency (ms) - 2009
25.0
20.0
15.0
10.0
5.0
0.0
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6. Effect on the industry?
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List of top 25 Exchanges*/ATSs using ATS systems
Rank
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Exchange/ATS
Value Traded
(2008) $m
Trading System
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NASDAQ OMX (US)
36,446,548.50
In-house(ex ATS)
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NYSE Euronext (US)
33,638,937.00
In-house(ex ATS)
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BATS (US)
7,800,000.00
In-house(ex ATS)
4
London Stock Exchange
6,473,611.60
In-house / outsource
Accenture
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Tokyo Stock Exchange
5,586,327.10
In-house / outsource
Fujitsu
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Deutsche Borse
4,724,486.10
In-house
Accenture
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NYSE Euronext (FR)
4,454,415.20
In-house (ex-ATS)
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DirectEdge (US)
3,800,000.00
In-house (ATS)
9
Shanghai Stock Exchange
2,586,680.60
Package (Xetra)
Accenture
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BME (Spain)
2,438,646.50
In-house
BME Consulting
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Toronto Stock Exchange
1,736,084.90
In-house
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HK Exchanges
1,629,259.90
In-house
Compaq
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Borsa Italiana
1,526,237.20
ASP (LSE)
Accenture
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Swiss Stock Exchange
1,509,899.60
Package (OMX)
15
Korean Stock Exchange
1,458,516.60
In-house
IBM
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Stockholmbörsen
1,354,243.70
In-house (OMX)
OMX
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Australian Stock Exchange
1,258,769.00
Package (OMX)
OMX
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Shenzhen Stock Exchange
1,241,747.40
In-house
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Taiwan Stock Exchange
837,774.60
In-house
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BM&FBOVESPA
750,250.50
Package (AEMS)
AEMS
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National Stock Exchange of India
740,901.50
Package (TCAM)
Tata Consulting
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American Stock Exchange
561,602.50
In-house
SIAC
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Tadawul (Saudi Arabia)
523,450.00
Package (OMX)
OMX
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Oslo Børs
458,078.40
ASP (OMX)
OMX
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JSE Securities Exchange
400,758.40
ASP (LSE)
Accenture
*WFE Statistics 2008 (with ATSs researched independently)
Use of
consultant / SI
Industry Trends – effect on execution
centres
• Added together, 86% of business in the top 25
exchanges goes through an ECN-style system
Traiditional SE
systems
ECN system
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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...
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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
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6. Conclusions
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Summary – future state architecture?
• Has the time between trading system
redevelopment shrunk?
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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
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•
•
C++,
RedHat Linux,
Open source components,
MYSQL or Oracle
• Offer Co-location
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