Published On: Thu, Sep 22nd, 2011

HKEx Keeps Deepening the Bench

The largest exchange by market capitalization (the value of its own listed shares not the sum of its listed firms) is widely known to be the most wanting in terms of matching engine technology, frictional cost of trading (stamp duty, spread and impact) and level of service (a government institution) has quietly been appointing key management to transform the HKEx into what appears to be an internationally competitive exchange.

The Stock Exchange of Hong Kong has long been a venue attached to its local retail community with no real interest in quality of execution or providing liquidity. Pushing out IPOs where Hong Kong’s local brokerage industry can both earn commission and margin financing fees to buy-in to the latest listing. On the surface it appears to be status quo with perhaps the reduction of trading hours foretelling the transformation that look to be underway at the HKEx.

It appears to have all started with the appointment of Julian Ragless in September 2010 as Senior Vice President Platform Development and Strategy. He runs the team that will transform the outdated HKEx trading infrastructure into a leading international exchange. Comprising the Platform Development (PD) Team are Jonathan Leung who heads the Hosting Service project and Simon Cheung who is overseeing the Next Generation Platform Roadmap. OTC Clearing and hosting are expected to commence Q4 2012 and the new Tsuen Kwan O data center is currently under construction.

Next was Joseph Meyer who was appointed Chief Administrative Officer in July, a newly created role, where he was brought across from Chi-X Japan. He brings a wealth of knowledge from international investment banks and, of course, alternative trading venue expertise. He oversaw the launch of Japan’s other Proprietary Trading System (PTS) and is no stranger to exchange competition.

And again, the HKEx has looked to international expertise with this week’s announcement of Chi-X Global’s CTO Richard Leung who will Co-Head the IT Division and fortify the exchanges Platform Development. According to his Linkedin profile Richard is home grown talent who has held senior technical roles since 1985.

The HKEx has focused itself as a capital raising center and it will continue to be one facilitating mainland and international listings. It is also rapidly developing as an off shore RMB trading center. But it appears to be quietly maneuvering itself to be a regional execution hub whether it be High Frequency Trading or servicing upstairs flow or even the ability to take market share from Shanghai or Shenzhen when China opens up with the appointments of these key members to its team.

Outside of technology is of course the stamp duty being levied by the Hong Kong government which is seriously impeding trading volumes. However, the government is flush with cash and rebating taxes to its citizens; it would seem to be a good opportunity to reduce or even eliminate the stamp tax altogether. The tax gone and with the right technology and people could transform the HK Exchange to be one of the largest (in terms of notional traded) bourses in the world.

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