Wednesday, March 28, 2012 6:56:14 AM

HKEx reaches for stars in tech transformation

Hong Kong Exchanges and Clearing (HKEx) is gearing up its technology offerings in a bid to fuel future growth through improved data capacity, lower latency and enhanced market data platforms across all asset classes.

Dubbed Orion, the US$380 million technology improvement programme includes the already announced construction of a new data centre in Hong Kong's Tseung Kwan O industrial estate and ambitions to deliver the highest capacity hosting services of any exchange in Asia-Pacific.

In addition, Julian Ragless, senior vice president and co-head of platform development and strategy at HKEx, said the bourse would deliver new infrastructure and platforms to provide greater connectivity and market data across all asset classes.

"This is not a single project but a progressive series of projects that will bring incremental value to clients," Ragless told, explaining HKEx was developing a suite of market data products, remote distribution hubs – beginning with Mainland China – and additional functionality through a FIX interface.

Ragless said the exchange was increasing its capacity to support options market expansion, as well as increased derivatives clearing performance and throughput capacity with faster response times for daily operational processing.

HKEx chief executive Charles Li said a core component of Orion was improving latency at the exchange, with hosting services providing low-latency access to HKEx platforms and an upgrade to its SDNet core trading and data network. But Li said while he expected high frequency trading (HFT) firms to make use of the new facilities, HFT traders were not the exchange's primary target for the system-wide upgrade.

"HFT is important in the US because there are four exchanges where firms can arbitrage but not be engaged in investment. Hong Kong has one exchange. We are not making these changes to get HFT customers," said Li. "We are not competing for speed – we aim to be fast but not the fastest. You don't just build freeways for Ferraris."

By the end of Q2, HKEx plans to have delivered improved securities trading and market data in the form of the upgrade to SDNet. Hosting services are scheduled to come online in Q4 with the completion of the new data centre. New market data services will be rolled out in 2013, with other platforms to follow.

Improvements to technology – including a recent upgrade to the bourse’s core matching platform – are a core facet of HKEx’s three-year plan, initiated in March 2010. The plan is designed to foster greater links between HKEx and China in light of the ongoing project to internationalise the renminbi. The exchange has also embarked on a revamp of its clearing risk management procedures after admitting earlier this month that may not currently be able to cope with the default of a major participant.

HKEx has also announced the first 22 firms that have been designated as founding members of its hosting services ecosystem ahead of its launch in Q4 this year. The firms include Credit Suisse, BT, Thomson Reuters, Clearstream, Fixnetix and RTS Realtime Systems, and each set up their service offerings ahead of the launch.

"By working together with these organisations, HKEx is creating a unique ecosystem that will ultimately lower trading costs while enhancing communications and electronic trade lifecycle capabilities of the marketplace," said Ryan Wuebbels, head of relationship management at HKEx.

Bruce Love +44 (0)20 7397 3818