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

Also we have automated stock specific circuit breaking system which stops trading for any equity with excessive trading (volume movement) or abnormal price movement. The system checks all trades for certain criteria. Given an abnormality on a stock, at the first stage trading is suspended for 15 minutes and resumes automatically after this time. If the excessive activity or price movement does not diminish and some other conditions exist, a second level is reached. This time trading stops until the end of the trading session, and the netting facility is removed starting from the next day, for trades on the relevant security for 15 days. In case of any automated suspension, public will be informed by an immediate announcement through KAP (Public Disclosure System of Turkey) which creates public awareness and gives investors a space to review their buying or selling decisions during the temporary suspension period. And naturally, each circuit break initiates an investigation on the orders and trades in terms of manipulation or any other market abuses.
Brian: Do your members want real-time trade surveillance?
Ali: In Turkey surveillance is the exchange’s responsibility given by the new Capital Market Law which went into force by the end of 2012. As mentioned above we submit our findings to CMB as a report in order to provide enough evidences for legal procedures against offenders. That said, some of our members have interest in having their own surveillance tools and filtering mechanism – limited to orders and trades routed through their facilities. This is mainly for compliance purposes and in order to provide enough shelter for avoiding customer complaints about operational abuses or negligence. Since most investors prefer to use more than one member/account to trade simultaneously, it is difficult for any member to see the complete market picture by monitoring orders/trades originating from its own sources.
Andres: The Santiago Stock Exchange implemented pre-trade risk controls for trades via DMA and the other mechanisms allows in order to take control of any single transaction. At the same time, we allow Drop Copy Services to members’ systems in real time for their own related risk controls.
Brian: Dimitris, how does the Hellenic Exchange handle trade surveillance and do your members want real-time surveillance?
Dimitris: Although we operate an online and historical surveillance system which we own and built, we are currently expanding the functionality and scope of the system by acquiring a new surveillance system. We are in the last phase of a procurement procedure with a timeframe to have a new live surveillance environment in Q3 2014.
Regarding our member firms, DMA services have been offered for some years, but our brokers haven’t yet expressed any interest in real time surveillance services. I think this is something that will come up in our environment in 2015, so we have some preparation that we already planning to do.

Brian: Dimitris, can tell us what current initiatives you are pursuing for your members and whether there are any changes on the horizon in 2014 for your members?
Dimitris: Except from the DMA that we offer through FIX and our proprietary protocol (ODL), we recently permitted sponsored access through a central FIX engine and OMS for member clients in order to have direct access to the trading system. Members can apply permissions and filters to the central OMS for orders to be executed under their name.
Regarding 2014, one big project that is going live in Q1 is the consolidation of the two trading systems (cash and derivatives) into one. Actually we are expanding our equity trading and clearing systems to host the derivative market. So we offer one API (FIX and ODL) to access the market, one API for clearing and one API for market data feed. This is a big change in our market and creates a more efficient and cost performing market for all participants.
Brian: Dimitris, what about your regulators? Are they asking for any changes in 2014?
Dimitris: Following the ESMA guidelines our regulators ask for more compliance and audit reports not only from the exchange but for the members offering DMA services also.
Brian: Ali, tell us about your systems and technology that you support How does the growth in Turkish economy affect your decisions going forward?
Ali: Over the past decade, Turkey has experienced structural changes which have led to substantial economic advances. By 2011, Turkey became the 16th largest economy in the world and the 6th largest economy in Europe.
A fully automated Equity Market Trading System of Borsa Istanbul partially started on December 3, 1993 and became fully functional with all stocks tradable on an electronic environment after October 21, 1994. Trading system was purchased from a US Company called TCAM systems with the source code. During the course of time capacity in terms of number of transactions and latency has improved considerably. As of March 31, 2013, the throughput of the system is almost 5,000 orders/second and the latency at the peak time of order flow is below 1 millisecond via FIX interface.
The trading system for futures and options market has been built upon the trading system purchased from an Australian company, CSL, which was later acquired by NASDAQ-OMX. Borsa Istanbul has the source code and full authority to amend the code. The trading system supports continuous price auction as well as price fixing (call auction) mechanism. The system used by TurkDEX as the trading platform is a different version than the one used by Borsa Istanbul. After the planned takeover of TurkDEX, two different versions will merge into a single trading platform.
The trading system infrastructure provides an online real-time connection with Takasbank and makes it possible to monitor all orders, transactions, margins and positions on account basis. Various types of orders including limit, market, keep remainder and market contingent (stop loss) orders are supported by the trading system.
Regarding growth in the Turkish economy, the number and diversity of listed companies play a significant role in the success of our exchange. Currently, 417 companies with a market value of around $300 billion are listed. Our aim is to raise the number of traded companies to 1,000 by 2023. In line with IFC vision, we also started the Listing Istanbul project in order to attract foreign companies for listing at Borsa Istanbul. Accordingly, we will be a major funding source for both Turkish and foreign companies and support Turkey’s growth on years to come. The demand for services of an exchange is directly proportional to the size of its product range.