Technology Update From HKEx

Jonathan Leung, Vice President, Head of Hosting Services at Hong Kong Exchanges and Clearing Limited details the ongoing developments at the exchange.
Two years ago we launched a major technology upgrade program called HKEx Orion. It is a major upgrade and enhancement of our IT platform capability with a committed investment of around HKD3 billion. Out of the HKD3 billion, a large proportion of it will be invested into two major projects. First is the new data centre in Tseung Kwan O, while the second is our hosting services, which are being delivered on the data centre infrastructure. We completed the construction of the data centre in Q4 last year. The current Hong Kong Exchanges and Clearing company is a result of a merger between The Stock Exchange of Hong Kong and the Hong Kong Futures Exchange and three related clearing houses that operated in multiple data centres. Those data centres are a bit old and not able to meet our new initiatives’ needs because they don’t have the capacity to support installation of new systems. So we wanted to consolidate the existing data centres, to support our new business growth and, of course most importantly, maintain Hong Kong’s strong position leadership in the global market.
We have built our new data centre to meet the highest quality Tier-4 standard; quite a number of exchanges are only running their markets in the next level down Tier-3 -data centres. We decided to do this because we believe delivering robust and reliable market infrastructure is very important, especially in Hong Kong.
Phased migration
The first phase of the migration, the cash market, was completed in October and the production system is already running in the Tseung Kwan O data centre. Last December, right after the migration of the cash market, we launched our Hosting Services to support cash trading inside the same facility. The data centre itself is a very environmentally friendly building. We achieved the LEED Gold certification by the US Green Building Council. To achieve such stringent certification we have implemented a number of energy saving features.
One of the simplest examples is the deployment of LED lighting throughout the whole building.
We built 320 racks for Phase 1 of Hosting Services. Currently, about 60 users are using our services with over 100 racks deployed. That is about one-third of the capacity taken up just in the past few months. Currently about 20 per cent of the cash market’s daily turnover is generated from brokers using our Hosting Services, which is quite significant. A second major milestone will be the migration of the derivatives market to the new data centre around June this year. Hosting Services users will be able to have access to both markets after the migration. This is particularly important for clients who have the need to arbitrage across both markets.
The ecosystem
Another significant feature of the Hosting Services is that, unlike some other exchanges that only offer co-location services, we have adopted a more open approach.
We call this an ecosystem approach. In addition to brokers, we also allow information vendors, technology vendors and connectivity providers to offer services to the brokers inside our data centres. Brokers are able to subscribe for different services such as global connectivity and market data feeds through this Hosting Services Ecosystem very conveniently.
We are also a carrier neutral data centre. Currently, we already have 14 telecom network providers set up in our Hosting Services facility. That means end users have complete freedom to choose which connectivity provider they want to use. Some other exchanges operate telecom services themselves. They prefer users to use their services and restrict the users’ choices of third party connectivity providers. For us, providing telecom services is not our core business and we want to partner with those companies who are really experts in the area to provide the best service to our brokers.
Market data
Another major project of the HKEx Orion initiative is the HKEx Orion Market Data Platform (OMD). Phase one of the OMD project, the cash market part, is targeted to launch in the third quarter of 2013. Hosting Services users will be able to directly connect to the OMD in a low latency manner.
The major benefit of the OMD is that it will improve transparency in the sense that we are able to provide a full order book, compared to the current provision of up to 10 market depths. In terms of system capacity and choices of products, the OMD will offer data-feed products, disseminating market data in streaming mode in addition to the basic conflated data-feed, versus the single data-feed product sending snapshot updates supported by the current market data system.
We will extend the OMD’s footprint to Mainland China by establishing our Mainland Market Data Hub (MMDH) in Shanghai. The MMDH is tentatively targeted for rollout in the last quarter of 2013. For the cash market another major project we plan to launch this year is the Orion Central Gateway (OCG).
A major benefit of OCG is that brokers will no longer be required to install and maintain the current Open Gateway hardware. For Hosting Services users, this also means that they can utilise their subscribed rack space more efficiently; they can connect to the OCG with a low latency network provided by us and we can support up to 10 gigabits per second physical port speed.
Derivatives update
For the derivatives market we will upgrade to the Genium platform by the end of 2013. It also supports a central gateway architecture, so it will cost the derivatives participants much less to use our Hosting Services, as they will not need to install gateway hardware inside their racks.