Exchanges around the world are looking for new strategies to improve their technology infrastructures. Whether the objective is to manage transaction volumes, prevent trading failures, build market data revenue or meet competitive challenges, it is clear that exchanges must focus on the underlying technology that drives their businesses.
In the Clear Path Analysis report, Global Exchange Technology and Data, released on Monday 25th June, leading exchanges take stock of their most pressing challenges and discuss how they are working to address them through improvements to their technology infrastructures.
Technology issues affect the markets in a number of ways, and reliability is essential. For even the most advanced exchanges, well-known trading technology failures have generated reputational damage and heavy costs. In addition to the importance of overall reliability, however, technology is also a critical competitive factor. Commentating in the report, Jean-Francois Delrieu, Head of Technology Partnerships, NYSE Euronext, states “One of the challenges we are facing is the need to create the capacity to innovate and improve the technology of our platforms to outperform the competition…we are aiming at constantly improving the platform, while keeping it stable for everyone to trade transparently and smoothly.”
Highlighting the competitive advantages new technology can provide for exchanges around the world, Kersi Tavadia, Chief Information Officer, BSE (formerly Bombay Stock Exchange), explains how they have capitalised on these advances: “We have invested heavily into upgrading our technology, which allows us to increase our speed and keep pace with competitors in the West. As our exchange grows, we will continue to upgrade our technology.”
Another top technology issue for exchanges is market data distribution. Exchange groups are looking for the most effective ways to build data revenue, broaden distribution, and serve the rapidly growing mobile application market. Hubert Holmes, Chief Business Development Officer, Xignite, said in the report “Exchanges are becoming more aware of growing demand from data consumers who want exchange data, but without the infrastructure or cost structure of legacy data distribution technologies.”
For developing exchanges, the rise of cloud computing and other cost-effective technologies helps expand global reach and attract new liquidity. Commentating on this sector of the market, Holmes added “For developing exchanges, market data is an important asset for strengthening brand identity and attracting liquidity, but one of the challenges has been how to cost-effectively reach the market. This is where a cloud-based market data distribution capability is essential. When users only need a web browser and an internet connection, there is no geographical or technological barrier to your market data.”
While the report by Clear Path Analysis shows that improving technology infrastructure is a necessary and critical priority for exchanges, the group also acknowledges the realities of regional regulatory frameworks and their impact. Eileen Muscat, Chief Executive Officer, Malta Stock Exchange, sums up the latest opportunities with: “Technology in itself facilitates, but does not provide the solution, and therefore the improvements in technology are only effective if the supporting legal, regulatory and operational and procedural framework actually supports an increase in business.”