HKEx: Orion transforms trading

Hong Kong Exchanges and Clearing (HKEx) is the nervous system of the city's financial industry. It operates the Hong Kong Stock Exchange and is one of the world's premier exchange-owners based on market capitalization of its shares.

Technology plays a vital role at HKEx's daily operation. Managing a trading platform that processes millions of dollars per minute redefines "mission-critical", and stringent IT governance is constant. HKEx is also known for its conservative attitude towards new technologies.

Thus HKEx's recent HK$3 billion tech initiative--Orion--is a significant tech evolution which will shape Hong Kong's financial and IT markets.

"Orion is an enterprise-wide transformation," said Richard Leung, HKEx's senior VP and co-head of the IT division, "and its purpose goes beyond driving revenue or efficiency within the company."

Iconic datacenter

HKEx's datacenter, sited at Tsueng Kwan O, is key for Orion. With over 1,200 racks, this tier 4 datacenter is one of the larger datacenters in Hong Kong and an iconic project for local datacenter industry development. The compute-power will support HKEx operations and the company's new services offering: a hosting service.

Like many major trading platform operators around the world, HKEx is launching the services to enable exchange participants (for example, brokers) to access the HKEx market for electronic trading through an in-building low-latency LAN. Network latency, currently at 1,500 microseconds, is expected to drop to 50 microseconds using the hosting service.

But HKEx's hosting service offering isn't intended as a cash cow for the company, according to Richard Leung. "The hosting service offering is not about making money," he said. "Of course, we'd like to generate a reasonable profit--as an obligation to our shareholders--but if that was the only reason, the operation [of the hosting service] would be very different."

Data ecosystem

HKEx's hosting service unit uses an ecosystem approach: encouraging multiple technology vendors to participate and allowing exchange participants to choose providers that best fit their needs.

"Our hosting service offering provides low-latency trading," said Jonathan Leung, vice president and head of hosting services, "and is also open to all technology providers."

Network service providers can set up a point of presence at the datacenter to provide domestic and international connectivity. Other financial technology providers can also set up their infrastructure at the HKEx datacenter to provide Broker Supplied System (BSS) and Order Management Systems (OMS) for their customers.

"The idea is to bring more choices to our customers," said Jonathan Leung. "But we do not represent or recommend any particular vendors to our hosting customers." To ensure fairness, all network service providers will operate in the same designated area within the datacenter and enjoy the same connectivity.

"The benefit [of the ecosystem approach] is to energize the local financial market," Richard Leung added. "Any parties that are interested in contributing to the local financial trading industry can participate in our datacenter."

"Our hosting service is one of the cheapest among other exchange owners," he said, "because the primary reason for launching the hosting service offering is to enhance Hong Kong as an international financial center."

Leveraging best practices

To benefit all exchange participants, HKEx is bringing its internal IT management best practices into the hosting service offering.

"IT plays a consulting role in the design of Orion and an enabling role in many of the projects within it," said Richard Leung. "We provide IT services to the hosting service unit just as we would to an internal customer."

HKEx's IT division supports the hosting service at all levels--including datacenter design, choice of vendors and ongoing maintenance. "There's a set of internal SLAs and we've signed a document on the agreed SLAs," Jonathan Leungadded. He said HKEx operates in a critical environment and ultra-low-latency availability is a basic requirement.

"Since launching our trading system AMS/3 in 2000, we've achieved 100% uptime," said Richard Leung. "We strive to bring the same success to the hosting services offering."

HKEx applies the company's internal product development methodology, which is regularly reviewed and verified by third-parties, to the project. Richard Leung added that external parties also audited HKEx's software development lifecycle--its development and implementation process, documentation and IT infrastructure. "The biggest challenge for us is to strike a balance between providing high availability and achieving the required time-to-market," he said.

To provide high availability, Richard said the system needs to be close to bug-free. "But the only way to achieve that is ample time--the more time available for testing different features of the systems, the more likely the system will be close to bug-free."

Instead of being a sub-division within HKEx's IT division, the hosting service is a separate business unit under the Platform Development (PD) team. Comprising members from both business and IT, the PD team operates as a steering committee to plan and manage the roadmap of the Orion initiative.

Orion's IT structure

Such arrangement ensures the stringent internal IT governance is applied, while incorporating business policies to allow growth and development.

"It's all about risk," said Richard Leung. "Being able to explain the risk involved to the board, we can achieve a higher quality system with a reasonable time-to-market."

In addition to developing the PD team, HKEx also appointed Leung as the new co-head of IT last October for the Orion initiative. Leung, a former CTO of alternative trading systems operator Chi-X Global, currently shares the growing responsibilities at HKEx's IT division with Bill Chow, who is also the CTO.

"Having co-heads for the IT division isn't an unusual structure," said Richard Leung, "as we are sharing a wide range of responsibilities." He said the structure allows the introduction of new initiatives with a deep understanding of the system's background.

Richard said the company also increased its IT staff to 240 people--about 25% of the entire HKEx workforce. "It's a high ratio for IT staff compared to other exchange owners," he said. "But we're managing two key trading platforms and four clearing houses, which is a heavy workload."

With the introduction of this enterprise-wide transformation, HKEx's IT division is constantly evolving to enable the company to move from being technology-enabled to technology-centric, noted Richard Leung.

This story, "HKEx: Orion transforms trading" was originally published by Computerworld Hong Kong .

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