Chilean Stock Exchange Streamlines Securities Transaction

Transcription

1 Chilean Stock Exchange Streamlines Securities Transaction October 9, 2009 Andrés Araya Falcone Chief Information Officer Santiago Stock Exchange Copyright 2009, - Andrés Araya Falcone, CIO 1

2 Agenda Why low latency? Key BCS Business Drivers The new BCS trading venue Project governance and Team Conclusions BCS stand for Bolsa de Comercio de Santiago or Santiago Stock Exchange Copyright 2009, - Andrés Araya Falcone, CIO 2

3 Agenda Streamlined Securities Transactions Why low latency? Key BCS Business Drivers The new BCS trading venue Project governance Conclusions Copyright 2009, - Andrés Araya Falcone, CIO 3

4 Why low latency? Today algorithmic trading impacts virtually every market and asset class. In US equities alone, some 53% of trading in 2010 will be driven by computerbased algorithms, up from 33% in 2006, according to research firm Aite Group. Impacts on infrastructure: 100K + mps 100+ ms Throughput requirements have grown rapidly over the past few years. Some venues will require 1 million messages per second (mps) within the next 3 years. At same time, latency requirements have dropped from in excess of 100 milliseconds (ms) to well under 1 ms. Throughput 1 1,000 mps Throughput Latency Latency < 1 ms < 2000 >2008 Exchange infrastructure must be algo-ready to keep or attract liquidity. This is one of the key objectives of new BCS platform: Ultra low latency, high throughput and scalable design. Copyright 2009, - Andrés Araya Falcone, CIO 4

5 Low latency industry Partial list of providers Software Hardware Services Network Layer Middleware Layer Decisión Support Applications FPGAs Vendors GPUs Vendors Order Management & Execution Copyright 2009, - Andrés Araya Falcone, CIO 5

6 Typical Latencies in Electronic Trading 100s of msec 10s of msec msec µsec Low Frequency Trading Market Maker Derivative Pricing Latency Arbitrage Prime Brokerage Services Equities DMA Services High Frequency Trading Source: Citihub Report Latency Remediation in etrading Platforms Copyright 2009, - Andrés Araya Falcone, CIO 6

7 Latency in Perspective is viewed in significantly different ways depending on the requirements of the market participant For Exchanges: The perspective is influenced by regulatory mandates as well as traditional business practices For trade execution latency is measured from the time a message is received by the exchange's communications front-end system until a response is delivered back to the frontend system. For Market Data dissemination latency is measured from the time a message leaves the matching engine goes through the Market Data Dissemination system to the communications front-end system For Institutional Investors, Funds Managers, Broker / Dealers: The perspective is influenced by competitive forces, increased demand for products and services and a greater emphasis on managing risk Some strategies, such as algorithmic trading, significantly influence latency. Simply put, the requirement is in getting the fill done quickly enough that gains are preserved. The longer the delay, the greater the chance the execution will fail Fast confirmation is needed for Price Takers while Price Makers want assurance of orders in the fastest execution venue to be attractive to Price Takers For Market Data Vendors: The perspective is influenced by high speed execution, coupled with high quality and high reliability As volume and velocity increase, bandwidth and compression techniques are also increasing as a latency factor The challenge created by the need for extreme low latency has created the opportunity to deliver diverse offerings at multiple price points and service levels Source: Frederick L. Pennino - Global Exchange Industry Best Practices Analysis, March 2008 Copyright 2009, - Andrés Araya Falcone, CIO 7

8 Customer Preference Analysis An analysis of customer preferences was conducted to learn the relative significance of specific attributes customers and potential customers look for in determining which exchange to route their trades to. 0=Not Applicable 1=Not Important 10=Very Important Key Attributes Customer Segments (5) Retail Brokers International ** (6) Hedge Funds / IB Prop or (7) Investment Banks a Low Latency b Availability/ Reliability c Scalability d Adaptability/ Time to Market e Cost of trade f Product Mix g Real time Market Data h Liquidity i Accessibility j Conform to Int l Regulations k Global Reach l Relationships/Alliances m Thought leadership / Building confidence n Consistency of Performance ** Source: IBM interviews Copyright 2009, - Andrés Araya Falcone, CIO 8

9 Agenda Streamlined Securities Transactions Why low latency? Key BCS Business Drivers The new BCS trading venue Project governance Conclusions Copyright 2009, - Andrés Araya Falcone, CIO 9

10 BCS a one-stop-shop Bolsa de Comercio de Santiago (BCS) VALUE CHAIN Systems Order Routing Transaction Information Clearing Settlement Back Office Equity Market Bond Market Money Market Futures Market Options Market OTC Market ALREADY IMPLEMENTED NOT IMPLEMENTED YET Copyright 2009, - Andrés Araya Falcone, CIO 10

11 Key BCS Business Drivers Rapid growth in new products for trading, multiproducts and services (ETF, Derivatives, OTC Market, CCP) Direct Market Access Alliance with other regional exchanges and explosive growth in transactions High competition on transaction costs Continued focus on cost containment / takeout Risk management Copyright 2009, - Andrés Araya Falcone, CIO 11

12 Key BCS Business Drivers Trends in electronic trading End-users become less dependent on brokers or intermediaries in several products Distinctions between wholesale and retail business blurs The playing field will be levelled for new market participants with leading edge technology Electronic trading provides one-stop shop for pre-trade, trade and post-trade needs The growth of Algorithmic Trading Increasing popularity of Direct Market Access The emergence of Liquidity Pools Copyright 2009, - Andrés Araya Falcone, CIO 12

13 Agenda Streamlined Securities Transactions Why low latency? Key BCS Business Drivers The new BCS trading venue Project governance Conclusions Copyright 2009, - Andrés Araya Falcone, CIO 13

14 Flashback 1929, The first Chilean trading venue The matching engine Data Dissemination Distribution Gateway (Primary and Backup) Monitoring Proximity or Co-llocation Data BUS Copyright 2009, - Andrés Araya Falcone, CIO 14

15 The new BCS trading venue Key features Trading Platform: scalable, low latency, high throughput matching engine allowing advanced order execution with high speed and reliability Trading Methods: supports all common trading methods, including continuous matching, call auctions, crossing. Order Types: supports a wide variety of order types Validation: trading system contains pre and post-trading dynamic validation rules and controls Client Access: high performance FIX engine allowing standardized inbound connectivity from multiple sources Outbound Market Data: low latency, high throughput market data dissemination for events on the order book Multi-layer fault tolerance Copyright 2009, - Andrés Araya Falcone, CIO 15

16 The new BCS trading venue Key features (continued) Order entry management Desktop and Trader Workstation Index management IBM Websphere Low Latency Messaging RedHat Linux 5, IBM SolidDB, JAVA APIs to facilitate development and extension of each component (QuickFixJ, JFreeChart, JIDE Software) Copyright 2009, - Andrés Araya Falcone, CIO 16

17 The new BCS trading venue Order types (partial list) Limit risk Speed of execution Price improvement Time to market Limit Market to limit Stop Stop limit Trailing Trailing stop Trailing stop limit Pegged Bracket Spread Market Market on close Market on open Auction Cross Opening auction Closing auction After hour All-or-none Fill-or-Kill Good-till-Canceled Good-till-Date/Time Privacy Iceberg Hidden Copyright 2009, - Andrés Araya Falcone, CIO 17

18 The new BCS trading venue Trading System Architecture Layers Trading Applications Packaged Applications Proprietary Applications IT Infrastructure Connectivity and Network Copyright 2009, - Andrés Araya Falcone, CIO 18

19 Connectivity, Network and IT Infrastructure Blade Servers IBM BladeCenter H Chasis IBM HS21 XM Intel X5570 Quadcore 2,93 Ghz 34 GB RAM Database cluster IBM x3650 with Intel X5570 Quadcore de 2,93 GHz and 34 GB RAM Storage IBM DS4700 Express Model 72 4 Gbps Red Hat Linux 5 IBM WepShere AppServer v7 IBM MQ LLM 2.1 IBM soliddb, MS SQLServer Java Copyright 2009, - Andrés Araya Falcone, CIO 19

20 Packaged Applications IBM WebSphere MQ Low Latency Messaging V2.1 Major features IBM WebSphere MQ Low Latency Messaging is a high-throughput, low-latency messaging transport Version 2.1 Java API and native InfiniBand support Low Latency and High Throughput Averages 60µs/6µs latency at typical market data rates on Gigabit Ethernet/Infiniband Publishes 1 million/3 million, 120-byte messages per second on Gigabit Ethernet/Infiniband Reliable message delivery Reliable Multicast Messaging - RMM Reliable and Consistent Message Streaming - RCMS Automated state synchronization and stream failover for high availability Simplified component replication with total order and state synchronization facilities Zero messages lost during failover at high rates Copyright 2009, - Andrés Araya Falcone, CIO 20

21 Packaged Applications IBM WebSphere MQ Low Latency Messaging V2.1 Major features (continued) APIs to monitor statistics and performance Provides visibility into the status of the network, senders and receivers Congestion and Traffic rate control Automatically detects and handles slow consumers Runs on a large number of platforms Windows (32, 64), Linux (32, 64), Solaris (Sparc, x86, 32, 64) C, Java, and.net APIs Copyright 2009, - Andrés Araya Falcone, CIO 21

22 WebSphere MQ Low Latency Messaging 2.1 Performance with Gigabit Ethernet and InfiniBand Maximum Throughput Message Network size Native Infiniband IP over InfiniBand Ethernet (1 Gbit/sec) (bytes) msgs/sec Mbit/sec msgs/sec Mbit/sec msgs/sec Mbit/sec 12 43,906,75 9 4,215 21,061,412 2,021 8,276, ,252,54 4 4,771 6,752,110 2,430 2,495, ,081,223 4,878 2,364,942 2, , , ,207 4, ,754 2,647 98, ,000 49,796 4,780 22,391 2,149 9, ,000 5,126 4,921 2,639 2, Network Ethernet (1GbE) IP over InfiniBand (IPoIB) Native Infiniband Single hop latency (microseconds) Message Transmission rate (msgs/sec) size [bytes] 10K 100K 250K 500K 1M The reported throughput (in the Mbit/sec column) is that of the application; the throughput going out to the network is actually higher due to headers which are appended to each packet Copyright 2009, - Andrés Araya Falcone, CIO 22 Latenc y in M icroseconds , , , ,000 1,000,000 Transmission Rate in messages/sec 1GbE 45 byte 1GbE 120 byte 1GbE 1000 byte IB 45 byte IB 120 byte IB 1000 byte

23 The new BCS trading venue Matching Engine Message Flow Websphere MQ Low Latency Messaging Tier Usage: High speed data transport between clients, exchange gateways and matching engines Immediate delivery of market data for regulatory compliance and distribution Functions: Benefit: Highly reliable multicast or unicast communication to downstream execution infrastructure Highly available communication with no loss of performance Flexible message filtering for complex execution routing Total ordering Management of failover streams High throughput capacity to handle severalfold explosion of trade data with less servers Low latency to gain competitive advantage in execution time and attract liquidity Matching Engine A (active) RCMS RMM Matching Engine B (active) UDP / WebSphere MQ Low Latency Messaging 2.1 / BCSmsg RMM RMM RMM Gateway 1 Gateway 2 Gateway n TCP/IP / FIX 4.4 / SOAP Client Client Client Copyright 2009, - Andrés Araya Falcone, CIO 23

24 Deutsche Borse Group selects IBM MQ Low Latency Messaging Copyright 2009, - Andrés Araya Falcone, CIO 24

25 Chi-Tech chooses IBM MQ Low Latency Messaging Copyright 2009, - Andrés Araya Falcone, CIO 25

26 Agenda Streamlined Securities Transactions Why low latency? Key BCS Business Drivers The new BCS trading venue Project governance Conclusions Copyright 2009, - Andrés Araya Falcone, CIO 26

27 Streamlined Securities Transactions Project Governance COBIT Service Desk Clarity PPM Harvest Control Objectives for Information and Related Technology Websphere Rational Lotus Domino Quality Assurance IT Planing Project Management IT Security Development IT Services ITIL ISO ISO 9001 CMMI IT Operation PMO ISO SAS 70 Total Man-hours Design Development Testing HW/SW Support PMO & Others 352 Copyright 2009, - Andrés Araya Falcone, CIO 27

28 Agenda Streamlined Securities Transactions Why low latency? Key BCS Business Drivers The new BCS trading venue Project governance Conclusions Copyright 2009, - Andrés Araya Falcone, CIO 28

29 New securities trading platform for Chilean Stock Exchange Objectives: Position stock exchange for the market environment of the future High Throughput Low Latency High transparency Reliability/Availability/Scalability The new transactional engine of the Santiago Stock Exchange will process more than 3,000 orders per second - with latency measured in microseconds and under the concept of total connectivity - Jose Antonio Martinez, CEO, Santiago Stock Exchange Actions: Base new stock exchange securities trading platform on IBM WebSphere MQ Low Latency Messaging In memory Matching Engine Move to Blade server technology, Linux and Java FIX 4.4 protocol for total connectivity Benefit: Will improve flexibility, scalability, security of service to corporate clients. Cost efficiencies. Will allow exchange to optimize its electronic transaction management increasing capacity to 3,000+ orders per second (100x greater than present) and reduce latency to microseconds (100x lower than current level). Will position Chilean Stock Exchange in vanguard of world's regional exchanges, and allow it to leverage its strategic alliance with other Stock Exchanges and DMA. Copyright 2009, - Andrés Araya Falcone, CIO 29

30 Thank You Chilean Stock Exchange Streamlines Securities Transactions Andrés Araya Falcone Chief Information Officer Bolsa de Comercio de Santiago Copyright 2009, - Andrés Araya Falcone, CIO 30