SET BOOSTS ITS FIREPOWER.
In 2010, the Stock Exchange of Thailand (SET) decided it was time to make a major improvement to its trading technology infrastructure. Best Execution spoke to Cinnober, the Swedish technology firm that won this challenging contract.
Operating in an increasingly competitive and fast-moving global market – and with its sights fixed on becoming the regional centre for the ASEAN capital markets – SET knew it required an upgraded trading platform to support the growth of the Thai Capital Market.
The exchange launched a five-year technology master plan to create an infrastructure capable of boosting the efficiency and vitality of the Thai capital market and supporting its long-term growth. Four years on, with its new state-of-the art trading system SET CONNECT now in place, it is a key mission accomplished.
Back in 2010, SET’s trading infrastructure was based on a mix of systems developed both in-house and by third parties, with cash equities and derivatives traded on different platforms. The goal was to replace its existing trading, market data dissemination and surveillance systems for both asset classes with a pioneering solution centred on a single platform.
The exchange needed an architecture capable of achieving higher levels of efficiency and throughput, lower latency and greater functionality. It also wanted to connect smoothly to the trading systems of foreign markets via standard industry interfaces in order to attract more liquidity, as well as reaching a higher level of compliance with international standards. With speed of the essence in global trading, SET was after a platform where new products and services could be introduced quickly and with the superior transaction times to support high-frequency and algorithmic trading.
First step in the process was to find a technology vendor with the expertise to deliver the core systems required. All the major exchange technology suppliers bid for the project, and the Swedish-firm Cinnober carried off the prize in June 2011 – marking the first time the company had undertaken a project in South East Asia.
What singled Cinnober out? “We were able to offer a complete and proven solution compliant with international standards and encompassing all SET’s needs on a single platform,” says Cinnober CEO, Veronica Augustsson.
In addition to multi-asset trading, SET was looking for an integrated index calculation engine, connected to the trading engine’s business logic so as to be able to calculate real-time indexes on their listed stocks, sophisticated data dissemination functionality, and multi-asset market surveillance.
“Our delivery project model offered a high degree of transparency, interaction, and flexibility, all of which was attractive to SET in implementing an internationally- recognised solution that would also meet the specific needs of the Thai market.”
Working in tandem with local brokerages, SET CONNECT was launched in two phases, reflecting the fact that the previous infrastructure consisted of two separate systems with different structures, memberships and member communities.
Cash equities went first, as the asset class with the most pressing need for an upgrade. Its new system launched in September 2012 and the derivatives market followed suit in May 2014. On the very first day of trading on the derivatives platform, SET experienced their second-highest daily number of contracts traded ever, and on June 10th, the old record was beaten by as much as 19%.
The system is based on Cinnober’s high-performance TRADExpress Trading System, a multi-asset execution system that delivers powerful functionality, speed and throughput capacity, easily extendable and scaled up on demand. This runs alongside a new market dissemination system, TRADEexpress Information Manager, the TRADExpress Index Engine and Cinnober’s market surveillance system.
“For the first time, investors in SET can now trade both equities and derivatives on the same platform,” says Augustsson. “The new infrastructure enables multi-currency trading and, by incorporating the use of international industry standard interfaces (FIX 5), will attract the wider international trading community and is easy to link with other marketplaces to attract further liquidity to the Thai exchange.”
Accomplishing the migration to a global trading platform was always going to bring its own set of challenges. The deadline for the project was tight, particularly in the first phase, covering cash equities trading, index calculations, market surveillance and information dissemination services.
“It was a very ambitious target and in order to deliver, we had to quickly establish a very close working relationship with SET,” explains Augustsson. Client and supplier also had to manage a five hour time difference between their respective headquarters, something Cinnober is, however, used to, through its dealings with its large international client base.
“The majority of our project team was based in Stockholm, with some members also on site at SET. We focused on making partial deliveries to SET as early and frequently as possible to meet the timescale. SET had a highly skilled requirement and test organisation which tested the deliveries at every stage to confirm that we had understood and fulfilled their requirements. That close cooperation allowed us detect and solve any misunderstandings very early on, enabling us to deliver the various stages of the project at speed – in the case of the equities systems, in around ten months – and to meet all the specifications of the plan.”
Since implementing the new platform, SET has strengthened its market position in Asia. In October 2012, it became connected with the Bursa Malaysia and Singapore Exchange through the ASEAN Trading link, representing the first time investors have had a single entry point to three of the largest ASEAN equity markets. In Q3 2013, SET overtook the Singapore Exchange with about thirty five per cent higher trading volume and grown to have the highest trading volume in the region. In addition, SET has set out a plan to grow the market capitalization of listed companies and to enhance its product offerings to meet demands of both local and foreign investors.
“Markets everywhere today must be able to act quickly on changes and maintain their ability to shape their own destiny,” says Augustsson. “A trading venue’s technology is now more important than ever. Cinnober is proud to have worked in close partnership with SET to deliver SET CONNECT to the Thai capital market, enabling it to perform to the very highest standards at both regional and global level.”
© BestExecution 2014