FIX in the JSE environment

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FIX in the JSE environment

• Cape Town
• 09 March 2005

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The STP Context
The goals of STP are -

• End-to-end automation of the trading process
  input once, enrichment through systems

• Manage the increased volumes and risk
  requirements of the securities trading business-
  equities, financial and agriculture derivatives
  and loan stock

• Create the foundation for efficient electronic
  flow of cross-border trade information

Create a seamless flow of information from the
initial order capture straight through to final
settlement
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Drivers

• Efficiencies
• Cost Effective Solution
• Reduced Risk
• One common standard used by all no translation
• Possible shortening of Settlement Cycle(enabler)

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STP and the JSE

• The STP initiative provides a technology platform
  to support the processing of
• Electronic Trade Initiation (ETI)
• Electronic Trade Confirmation (ETC)
• Electronic Trade Settlement (ETS) and
• Electronic Data Interchange (EDI).

• The JSEs primary focus has been ETC as the most
  critical component to enable settlement

• ETC encompasses
• Trade Allocations (flowing from Fund Manager to
  Broker)
• Contract Notes (flowing from Broker to Fund
  Manager)
• Trade Affirmation (flowing from Fund Manager to
  Broker)

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The Settlement Wheel
The settlement wheel is a graphic depiction of
the message flows between entities

Contract Note
Broker
Fund Manager
Affirmation
Settlement Order
Status Intimation
STRATE
Settlement Instruction
Confirmation
Lending Transactions
Allegement
Loan Order
Custodian
Lending Desk
Commit
Match Confirmation
The focus is the Broker / Fund Manager interface
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ETC at the JSE

• The ETC solution currently caters for 2 network
  providers being
• SWIFT
• HERMES (Peresys VPN)

• The JSE bureau handles the 2 network providers
  and has thus brought about economies of scale by
  centralising the environment and administration
  costs as well as providing a stronger basis for
  negotiations with providers.

• The JSE was a natural hub for the brokers due to
  the Central Technical Infrastructure

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Messaging
SWIFT
Fund Manager A
Broker A
JSE MAINFRAME
BDA
MERVA
Peresys VPN
Fund Manager B
SWIFT Comm
Broker B
Hermes STP Listener
Hermes STP Listener
Broker C

• Messages from the Broker are generated by BDA,
  formatted for MERVA and then routed through the
  applicable network service.

• A response from the Fund Manager follows the
  reverse path.

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Electronic Trade Initiation
And what about Electronic Trade Initiation
(ETI) ?
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Drivers

• Never really focused on by JSE or market
• Communication between Investment Manager and
  Brokers own infrastructure
• Investment managers replaced their system or in
  the process thereof with DECALOG or other
  international systems which are FIX compliant
• Cross-border trading(overseas standard)
• Investment Managers looking for a return on their
  investment
• Efficiencies
• Cost Effective
• Reduced Risk

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STP Steering Committee

• Representation from all market constituents
• Principles
• Critical Success Factors (CSF)
• Focus on equities, with other instruments in mind
  
• Tasks

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Findings ETI

• FIX Standard Pre-trade
• Pre-trade/trade initiation includes allocations
• ISO15022 standard Post-trade

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Vendors

• Vendors have come out with solutions
• Network specific(Some vendors are talking to each
  other)
• In some instances have reduced the multiple
  connections
• Is it the ultimate solution

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What can the JSE offer?

• Economies of scale by centralising the
  environment and administration costs as well as
  providing a stronger basis for negotiations with
  providers.
• The JSE is a natural hub for the brokers due to
  the Central Technical Infrastructure

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Managed Network

• Background
• Investigating a possible Managed Network for JSE
  Member connectivity
• Simplified access and better value
• Currently, fund managers connect to brokers by
  phone or private network

• Fund Managers
• Underlying infrastructure to deliver JSE and
  Third Party services
• Connectivity for FRI Order Management System,
  Information Subscription and data download

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JSE NETWORK VISIONA single network for access to
all services

• Other Stakeholders Services
• There are many other connections to the JSE
• London Stock Exchange
• FTSE
• Settlement
• Credit Checking
• Namibian Exchange

• Brokers
• Access to JSE trading and services
• Critical to doing business
• An enabling technology

• Fund Managers
• Underlying infrastructure to connect to JSE
  Members Third Parties
• Order Managemt System
• Information Subscription
• Data download

• Information Providers
• Information distribution is the core business
• Adding value services in addition to the JSE

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Effective Procurement and Support

• Economy of scale
• Procurement delivers cost benefits
• Effective vendor management
• Telkom or selected WAN service provider
• Consistent level of service
• Service levels and clearly defined support
• Security is paramount
• Understand security threats current policies
• Minimum standard security perimeter

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Future Network Capabilities

• An opportunity for new connectivity
• Internet access over the same link
• IP Telephony (Voice over IP)
• Platform for new Third Party value added
  services
• Information services
• Any to any communication within JSE network

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Summary and Next Steps

• Managed Network
• An underlying infrastructure
• Platform for services
• Order Management Systems
• Information subscribers

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The End
?
Questions