The Johannesburg Stock Exchange (JSE) has announced that it will migrate to a new trading system that will make its equity market trades 400 times faster. This is expected to happen in the first half of 2012.
Millennium Exchange will operate from Johannesburg, which means the trading system will relocate from London. This will improve connectivity and also allow for an increase in equity volumes traded on the JSE. This will increase liquidity.
“If we want to remain a world-class and relevant exchange in a highly competitive industry, we must remain abreast of technological advances,” said Leanne Parsons, COO of the JSE and head of the equity market.
Trading volumes increased when the JSE adopted trading platform JSE SETS in 2002 and climbed again when the exchange moved to the present trading platform JSE TradElect in 2007, so Parsons is confident that high-frequency trading (HFT) will occur and deepen the market.
Speed is becoming increasingly important in the exchange industry as exchanges cope with the rapid rise of high-frequency trading. Those exchanges that have trading systems with the lowest latency — the time between when an order is received, processed and acknowledgement sent — will retain and grow market share. Although high-frequency trading has its critics, who claim that it fuels market volatility, there’s no denying that investors can buy or sell stocks in an instant and also get a fair price.
But it’s not just speed that’s on offer here — it’s also operational stability. The JSE has had incidents that have required the equity market to be halted and moving the trading engine to Johannesburg should solve this.
The move will mean that the JSE will manage and operate the trading engine itself, but operating costs are expected to remain roughly the same. The idea is that JSE will aggressively grow trading volumes without hugely affecting trading software costs. Investors won’t be affected in terms of costs in any way.
Millennium Exchange is used by 10 exchanges worldwide and is known for its speed and scalability. It’s the flagship product of MillenniumIT, which is headquartered in Sri Lanka and is a wholly owned subsidiary of the London Stock Exchange Group.
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