The main trading platform of the London Stock Exchange (www.londonstockexchange.com) was successfully switched from the previous system yesterday (14 Feb) to the Millennium Exchange computer system. Technology solutions provider Millennium IT’s systems are widely installed in African stock exchanges.
Africa’s biggest exchange, the JSE Ltd (www.jse.co.za), announced on 3 Feb that it had concluded a licensing agreement with MillenniumIT to move its equity market trading activity onto Millennium Exchange, with the move planned for the first half of 2012. The JSE said the move will make trading 400 times faster. The Namibian Stock Exchange (www.nsx.com.na) also uses the JSE’s systems and both had been using the LSE’s TradElect system.
LSE swaps to compete
The 14 Feb LSE swap is the largest part of the exchange’s IT project. The London bourse bought Sri Lanka’s Millennium IT company for $30 million in 2009, instead of spending on a software package.
According to the a report in Financial Times, this is part of moves by the LSE to regain its position as a leading global exchange. It will adopt a faster trading system to take on rivals, expand into derivatives and streamline its clearing business. Antoine Shagoury, chief information officer of LSE Group, told the FT: “This migration is a crucial step forward in our drive to offer best in class trading services and marks a key milestone in the introduction of tightly integrated transaction technology across our markets,” said
LSE chief executive Xavier Rolet said the Millennium Exchange system is one of the fastest in the world, and can execute trades in 124 microseconds. Speed is a key criterion for luring high-frequency traders. Proprietary traders had been taking market share for trading in UK equities to exchanges such as Chi-X Europe and BATS Europe, operated by US-based BATS Global Markets but the Millennium Exchange is said to be double the average of the fastest speeds on BATS Global system. It is also faster than Nasdaq OMX.
The news came a few days after the LSE announced plans to merge with Canada’s TMX Group, subject to shareholders’ and regulators’ approval. Both exchanges would aim to pool their specialist trading platforms and cut IT development costs, and it would create the world’s biggest exchange by number of listings.
The switchover was delayed from last November, after the LSE’s Turquoise “dark pool” trading system for pan-European equities went out of order and was shut down as it switched to Millennium Exchange. The LSE held back moving its bigger UK equities trading platform away from the previous TradElect system until early this year. The LSE admitted last month that the problem had been caused by “human error”.
The LSE will move other parts of its operations onto the Millennium platform in due course.
JSE takes control
The JSE announced it will relocate its trading system from London to Johannesburg, enhancing operational efficiencies and ensuring trading optimization for market participants. Leanne Parsons, JSE Chief Operating Officer and Head of the Equity Market said in a press release: “We are excited about working with MillenniumIT and providing benefits to our market using their technology solutions”.
She is confident that the adoption of the new trading system will increase the equity volumes traded on the JSE and therefore liquidity: “In our experience, whenever we take a step forward with our trading technology, trading volumes also follow. If we want to remain a world-class and relevant exchange in a highly competitive industry, we must remain abreast of technological advances.”
Parsons explained that one reason to relocate the trading engine to Johannesburg was for increased operational stability. Now the JSE will manage and operate the trading engine itself. Parsons adds that operational costs will remain roughly the same: “The handful of incidents that we have had requiring the equity market to be halted, with reputational impacts, have been related to our international connectivity links. By moving the engine to Johannesburg, we eliminate this problem and are able to offer our clients improved service availability and stability.”
The structure of the deal with Millennium IT allows the JSE to grow trading volumes aggressively without incrementally increasing trading software costs. It also offers benefits for the JSE and opens up a new potential revenue stream by offering JSE stockbroking members the option to co-locate their computer servers near an exchange’s matching engine to cut the time it takes for messages to be sent to and from the trading engine and reduce bandwidth required. Many exchanges worldwide currently earn revenue from renting out computer space in co-location centres.
Millennium IT widely used in Africa
MillenniumIT, which has over a decade of experience in building technology solutions for the capital markets, is headquartered in Colombo, Sri Lanka and is a wholly-owned subsidiary of the LSE Group. Millennium Exchange is the company’s flagship product used by 10 exchanges and other execution venues worldwide and is known for speed and scalability.
Tony Weeresinghe, CEO of MillenniumIT and Director of Global Development at the LSE Group said in a press release: “Millennium Exchange is a next-generation trading platform that offers ultra-fast order-processing capabilities, providing users with a trading experience that is amongst the fastest, most reliable and technologically advanced in the world.”
MillenniumIT has also supplied trading systems to the securities exchanges in Kenya, Mauritius, Tanzania and Zambia, and central depositories and settlement systems in Botswana, Ghana, Kenya, Tanzania, Uganda and Zambia, among others.
The dynamic Stock Exchange of Mauritius (www.stockexchangeofmauritius.com), among the continental leaders in IT, has long promoted MillenniumIT trading and central depository systems. In addition to powering its own markets, SEM has also advocated them on other projects in which it has been involved, such as a central African regional exchange (which did not end up using Millennium IT), also Nairobi, Dar es Salaam, Botswana, Lusaka and the Bank of Ghana CSD.
In particular, MillenniumIT’s Smart Order Router system could support the hub-and-spoke model that is adopted by the Committee of SADC Stock Exchanges. Preparations are done and this is ready to move fast once funding is approved. The model can allow exchanges to continue to regulate their brokers and other institutions, as orders can be routed through local broking houses.
MillenniumIT also won the project for linking the East African Securities Exchanges and helping solidify the East African common market for capital but this too is awaiting funding.
Jit Seneviratne, Head of Business Development, told AfricanCapitalMarketsNews: “MillenniumIT sees a major role for itself in integrating African capital markets and we will use our technology to facilitate this. It certainly helps that we are already powering several exchanges in Africa… We have already identified the manner in which the links can be done. The only challenge if at all, is not in the trading but the clearing and settlement of pan African securities, but we have a plan for this as well.”