Turning the spotlight on China
Focusing in on China, a panel of technology experts debated the exploitation and implementation of existing and evolving technology tools. A discussion on ‘build or buy’ lead into a heated debate on the role of foreign vendors in the China market, with the conclusions offered by the panel leaving vendors in the audience with both hope and a little trepidation. BNY Melon Western’s Jack He reiterated that the industry remains closely regulated and that many existing systems are entrenched. For international vendors new to the market, being realistic about their commitment in terms of resource, time and experience of the market, was essential. PICC Asset Management’s Shong Gao urged even more caution. Foreign firms, he said, could not expect to use their existing products as cash cows in China. They needed, he added, to be prepared to adapt them for the China market, and to understand the costs and timeframes involved.
Turning to comparisons between the SSE, Hong Kong and NYSE markets, Deutsche Bank’s Kathryn Zhao used trading data to compare volatility characteristics from the three exchanges during the recent financial crisis. The statistics painted a fascinating picture of impressive liquidity and relative lack of volatility on the Shanghai market.
Innovating from within?
Looking to the future, Deutsche Bank’s Mark Maloney lead a discussion with experts from international sell-side firms pitted against local buy-side professionals on opportunities ahead. Head of Dealing at China International Fund Management, Michael Wang pointed out that direct market access (DMA) has worked in China for many years, but that capacity risked being an issue in a brokerless environment. RBS’ Andrew Freyre-Sanders agreed saying that, as well as providing breadth of product, the brokers can also take on some of the risk that pure technology vendors cannot. The consensus among the panelists was that algorithmic trading would be among the next steps in China. Wang said he aimed to have his first algorithms up and running shortly, but cautioned that additional work within the exchange, and so they are looking at the next three-to-six months.
A demonstration of algorithms at work by Shen Tao, Sales Manager for Institutional Sales and Trading, at Guosen Securities, one of China’s largest broker firms, (with 50 million accounts on their books) clearly showed the potential for algos in the market. Another illustration of the relative maturity of the market was that one of the highlighted algorithms had been created using the algorithmic trading definition language (ATDL) developed through FIX Protocol Ltd (FPL), which is still under testing elsewhere.
The conclusions from the final panel and the majority of expert speakers throughout the day, was that an efficient exploitation of electronic trading and FIX capabilities would happen rapidly in China, with the domestic market being driven both by innovation from within and outside the country.
For details on the next Face2Face event, please visit www.fixglobal.com
Gearing up – Have no doubt, China is gearing up to be ahead of the game … and fast!
