Asia Etrading Blog Is Born
When the Australian Securities Exchange (ASX) closed its trading floor in October 1990 and moved share trading to its own Stock Exchange Automated Trading System (SEATS) electronic trading in Asia has never looked back. Trading volumes have soared, exchanges have demutualized and reorganized and new financial product innovations have been spawned all in the name of electronic trading. Everyone has since staked a claim for the mother lode in the Asian electronic trading landscape.
The electronic trading gold rush in Asia has many nuggets up for grabs. Take software vendors for example. Electronic trading generally occurs with the click of a mouse in a software program running on a PC (Or Mac in the case of Orc Software). These software programs come in many flavours such as Order Management Systems (OMS) offered by Bloomberg or Fidessa or more recently Portware. Fast Direct Market Access (DMA) trading front ends from GL Trade, Tora and Trading Technologies are just a few of yet another subset of vendors. Even the brokers have been panning for gold with platforms like Barclay’s BARX or the more comprehensive, multi-asset class Autobahn from Deutsche Bank.
FIX (Financial Information eXchange) messaging has proliferated as well since coming to Asia in the late 1990’s and has evolved from simple single order messaging into a multi-asset, multi-user network where innovations such as Off Exchange or Dark Pool crossing networks providing discreet liquidity are a must. And with FIX wrought Algorithmic trading. ALGO 1.0 entailing VWAP and TWAP, ALGO 2.0 which brought Implementation Shortfall and now the next generation “Smart” Algo some of which consider the portfolio when slicing out singles names from a list. Great for the Program Trading (PT) desks.
With the buy-side focused on portfolio performance Transaction Costa Analysis (TCA) has also grown from a primitive VWAP Performance Calculation into a sophisticated autopsy of the entire trading process. With the buy-side measuring their cost of each and every trade Algo performance measurement necessarily drives Algo innovation. Brokers hate it when clients trade away because their algo crossed 3 spreads just to catch up with the volume profile curve to earn their client a poor fill.
New exchanges are even cropping up. The latest arrival to electronic trading is the Hong Kong Mercantile Exchange (HKMEx) which hopes to “…bridge the international commodities markets with China…” The HKMEx will utilize, like most exchanges in Asia, NASDAQ OMX’s trading engine. They will also use Patsystems front end and risk management system along with London’s own LCH CLearnet for the increasingly important post trade.
There is Risk and Basel II and MIFID and mobile trading, and …..I could go on and on and I will in another electronic trading blog entry. Stay tuned.