Published On: Mon, Oct 15th, 2012

Which Exchange Technology Will the Merged OSE/TSE Select?

Question:
Which Exchange Technology Will the Merged OSE/TSE Select?
Purpose:
One of the key ingredients to the merits of the OSE and TSE merger is the consolidation of technology at both the exchanges. There are 5 companies with their fingers in the pie but what one will prevail? We asked the industry what they thought.
Results:
Which Exchange Technology Will the Merged OSE/TSE Select?

Which Exchange Technology Will the Merged OSE/TSE Select?

Analysis:
With the Tokyo Stock Exchange’s takeover of its national rival the Osaka Securities Exchange all but complete, there are still a few unanswered questions. Chief among them is which exchange technology vendor will prevail under the merged entity? One of the selling points for the deal was the reduced costs to both the exchange and the members by having one single technology to match Japanese trades. The exchange could consolidate hardware and the industry would need only support one matching engine application programming interface (API). The TSE Arrowhead technology is a homegrown effort with Fujitsu behind the development. Their derivatives platform Tdex+ is based on LIFFE expertise under NYSE Technologies. The Osaka exchange’s derivatives platform was built by NASDAQ OMX and its equity technology by Hitachi. Each exchange has made large investments in its respective matching engines, but which one will prevail?

Just over half the respondents believe that NASDAQ OMX would be the last matching engine standing when the merger comes to a close. This is a much larger share of the votes than we had expected. If this does come to pass then NASDAQ will have effectively pushed NYSE Technologies out of Japan as SBI Japannext has also moved across the aisle from NYSE to NASDAQ. We were surprised to see that NYSE garnered little of the votes compared to Fujitsu. Hitachi along with “Other” rounded out the bottom decile of the poll. We did have some feedback from one participant who said they couldn’t vote as they thought there were two answers, one for cash and the other derivatives. The technology vendor who wins out here could push out its rivals for a very long time in one of the larger global trading markets. We will be watching what happens in Japan very closely.

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