Exchange Roundtable: Regulations And Technology In The US, Chile, Mexico, Turkey And Greece

Brian: Andres, were there any other important initiatives in 2013?
Andres: In September of this year the BCS in conjunction with ITAU BBA began trading the first exchange traded fund that tracks the performance of the Main Chilean Index (IPSA) of the Santiago Stock Exchange named as “IPSA It Now”. Last year, ITAU BBA won the tender which carried the exchange to create ETFs of its major Indexes. This process gave ITAU the exclusive use of trademarks IPSA, IGPA and Inter – 10 for a period of ten years, allowing the creation, negotiation and trade of ETFs in the national and international market.
Brian: Andres, what do you have planned for 2014?
Andres: The Santiago Stock Exchange is making a major effort to modernise the entire infrastructure for fixed income electronic trading markets in which the BCS has almost 100% of market share. BCS will enable access to these markets via the FIX protocol and in addition to significantly increased transactional capabilities such as reduce latency and increased throughput, we are also making a major upgrade to all clearing and settlement systems of the BCS, in order to upgrade to new technologies in production and related to electronic trading.
Andres, what about your regulators? Are they asking for any changes in 2014?
Andres: The Santiago Stock Exchange is in a program of international certifications ISO 27001 and ISO 22301 related to information security and business continuity. Conscious of our leadership position in the local market, we want our best practices to able to be verified by any third party. The BCS is also in a broad initiative to incorporate COBIT 5 for IT Governance. We also have some new trading regulations around Market maker obligations that we need to address. We are working with the SVS and the Central Bank to clarify how the derivatives market will work. We expect the authorisation in October or November, and full production two or three months after that.
Brian: Andres and Enrique, how do your exchanges handle trade surveillance today?
Andres: The BCS in 2010 implemented a surveillance solution developed in-house with the support of StreamBase (recently acquired by TIBCO). Thus, at present the BCS uses Complex Event Processing technology (CEP) for processing real-time correlations that support the market monitoring area more efficiently.
Enrique: In 2008 we developed at the Mexican Stock Exchange a system for market surveillance that we call Vigia. The system receives in real time the market data feed and, in real time too, looks for patterns of suspicious market activity. The end user has the ability, through the tools that Vigia offers, to specify new patterns. The system has access to the data warehouse in order to use historical information as needed. An ongoing initiative is to evaluate the use of SAP Hana, an in-memory database that could be used to host both the online and historical information and produce substantially faster computation results. In addition, we are re-developing the system of our central counterparty and this new system will include both real-time pre and post trade risk controls.
Brian: Ali, what about Istanbul? What current initiatives are you pursuing for your members and what changes are on the horizon in 2014 for your members?
Ali: We are currently adding a FIX interface for orders. The first release is expected in October with subsequent
improvements over time. This is a significant change that we hope will bring more order flow into Turkey. Additionally, starting Jan 1, 2014, the Borsa Istanbul will begin to disseminate Sarajevo bourse (SASE) data locally and abroad. In 2014 our co-location center for market participants will go live.
Brian: Ali, how does the Istanbul Borsa handle trade surveillance today?
Ali: We have an in house developed two-tier surveillance system. We share it with our regulator for monitoring market activities. The system works real time and on investor basis so that all the orders and trades that lead to alert signals can be identified including the immediate beneficial owner of the trades. Investors have unique registry ID given by Central Registry Agency of Turkey, Merkezi Kayıt Kuruluşu-MKK to trade and this enables us to track the investors properly. A wide spectrum of alerts and analysis tools for detecting market abuses such as market manipulation, insider trading or any other violations of rules and regulations exist in the system including new alerts and search tools which are developed continuously. We work in close cooperation with the regulator in Turkey, the Capital Markets Board-CMB, not only in daily monitoring, but also during the other stages of surveillance and investigations. Since Borsa Istanbul and CMB have a common system, both parties are simultaneously aware of the on-going activities in the market and have communication through mail and telephone and while detecting the unusual movement, while one party is focusing on trading patterns of possible offenders, the other party may reach out to the public.