Bolsa Mexicana de Valores (BMV), Mexico’s domestic stock exchange, has begun the rollout of a new equity trading engine in a bid to attract more high-frequency trading (HFT) to its market.
The new system, called MoNeT, will come online in stages this month, beginning 3 September with the implementation of pre-trade risk filters and performance enhancements.
At a total design and build cost of US$11.5 million, MoNeT can process an order in 90 microseconds – 300 times faster than BMV’s legacy system – and can process 100,000 orders per second.
“We are planning to add more functionality to the system in the coming weeks, such as new order types,” said Enrique Ibarra, senior vice president, technology, at BMV’s technology subsidiary, Bursatec. “We decided not to go live with all the features at the same time, to ease the burden on our members and ensure a smooth rollout process.”
BMV teamed with Carnegie Mellon University to help design the architecture of the new system, Bourse Consult to determine the required functionality, and IBM and Oracle for technical specifications.
Development of the new system began early 2009 with a view to attracting more sophisticated market participants to Mexico’s stock market.
“We took a lot of care in designing the system to handle explosive growth,” said Ibarra, noting the number of daily equity transactions had grown from a peak of 65,000 in 2005 to 3.1 million last year. “The need for better technology was clear and much of the demand was fuelled by greater interest by high-frequency trading firms.”
Debate on HFT in Europe and the US has intensified following a number of recent incidents which called into question the stability of market structure. In the US, the high-profile IPO of social networking website Facebook was botched by Nasdaq OMX in May, while on 1 August market maker Knight Capital almost went bust after its systems spewed multiple erroneous orders onto the New York Stock Exchange. In Europe, policy makers are currently locked in debate to determine the types of HFT curbs that will be included in MiFID II.
Ibarra said BMV was aware of the debate in other regions and cited a recent mini crash in Mexico last April, when an incorrect basket trade from broker Bulltick sent Mexico’s benchmark IPC tumbling by 2%. Bulltick withdrew from the Mexican market shortly after the incident.
“There are always risks associated with high-speed technology, which is why we incorporated filters from the start and spent a lot of time working on failover processes,” said Ibarra. “Although we have a high performance system, we are aware of the impact this will have on the ecosystem of the Mexican financial markets, so the onus is now on brokers to step up there own capabilities and improve their systems accordingly.”