Securities trading system systems are actually of relatively simple nature. They should in principle not be more complex than online auction systems that are able to process biddings (and auto-biddings) of different users, or online betting systems that keep a ordered stack (“book”) of orders at certain prices and that automatically match as soon as an incoming order matches an available order on top of the stack, etc.
The real complexity (and cost) often relies in the reliability requirements on them (let’s say that a stock exchange needs to be more reliable than a website where collectibles change hands), the regulatory compliance requirements (i.e. automated surveillance via statistical testing), the type of connections (which are not necessarily simple internet-based protocols and connections where many programmers are familiar with, but for instance SWIFT messages and dedicated data lines), and the performance requirements to deal with possible moments of intense message traffic in a timely manner.
Also, the network effects also play a big role. Brokers and traders want to be connected to the market where most other brokers and traders are connected to. For a market, it is therefore important to have a platform that has or gains a wide degree of connectivity. Connectivity of a trading platform that runs or hosts the market is different from membership. Connectivity is a technical notion, and membership is a legal notion. Membership means that a party has the right to trade in a market, and that requires an approval, acceptance or admission process with the market. Actually exercising that right will then happen through the technical connection with the trading platform that hosts the electronic instance of the market.
Not every market develops its own trading platform, but rather takes a license on an existing and readily developed system with an existing pool of connected parties.
Some of the trading systems, and the markets that they host:
- Millennium Exchange, developed by a Sri Lankan subsidiary of the London Stock Exchange group and running the London Stock Exchange, Borsa Italiana, the Dar Es Salaam exchange (Tanzania), the Lusaka exchange (Zambia), the Nairobi exchange (Kenya), Oslo Børs, Aequitas NEO (a Canadian “challenger” exchange), derivatives and fixed income markets of the Johannesburg Stock Exchange (South Africa), the Bolsa de Valores Lima exchange (Peru), the Namibian Stock Exchange (through an agreement with the Johannesburg Stock Exchange)
- NYSE Euronext’s UTP system, running the New York Stock Exchange, Euronext markets (Portugal, Paris, Brussels, Amsterdam), Warsaw Stock Exchange, the Luxembourg Stock Exchange, the Qatar Exchange, the Casablanca stock exchange and soon the Amman Stock Exchange, Beirut Stock Exchange, Bourse de valeurs Mobilleres de Tunis and the Muscat Securities Market.
- Nasdaq’s INET system is running Nasdaq in New York.
- Nasdaq’s INET Nordic system is running Nasdaq Baltic and Nasdaq Nordic equities markets.
- Nasdaq’s X-tream system, based on INET architecture, is running SIX Swiss Exchange, Nasdaq Dubai, the New Zealand Exchange (NZX), the Philippine Stock Exchange, the Iraq Stock Exchange, the Dhaka Stock Exchange, the Asia Pacific Stock Exchange, the Rwanda Stock Exchange, SBI Japannext, Saudi Arabia’s stock exchange – the Tadawul, the Colombia Stock Exchange (BVC), the Abu Dhabi Securities Exchange, the Kuwait Stock Exchange, the Nigerian Stock Exchange, the Erbil Stock Exchange (Kurdistan), the Bolsa Electronica de Chile, the Bahrain Bourse, Bursa Malaysia,Noble Markets (US based startup market), the Polish Power Exchange, the Egyptian Exchange, the Bangladesh stock market.
- XETRA’s from Deutsche Börse’s subsidiary Deutsche Börse Systems is running the Frankfurt Stock Exchange, the Vienna Stock Exchange, the Irish Stock Exchange (operating as ISE Xetra), the Bulgarian Stock Exchange, the European Energy Exchange, the Budapest Stock Exchange, the Prague Stock Exchange, the Ljubljana Stock Exchange, the Malta Stock Exchange, the Shanghai Stock Exchange
- Nasdaq’s Genium INET system is running Nasdaq Nordic and Nasdaq Baltic fixed-income and special procedures (tender offers, public share sales, IPOs) markets, TOM MTF (Dutch options market), Boerse Stuttgart, the Hong Kong Exchange’s derivatives market, and under the form of an adaptation (“XITARO”) Boerse Stuttgart, etc.
- 3V Finance’s (Vieil et Tradition – France) trading system runs the Douala Stock Exchange,
- Infotech Global (Pte) Ltd’s system, running the Ghana Stock Exchange
- First Information Technology’s (FIT) system running the Khartoum Stock Exchange (Sudan) and the Muscat Securities Market.
- EPEX Trading System runs the European Power Exchange and the Hungarian Power Exchange day-ahead spot auction market.
- Trayport’s GlobalVision Exchange Trading SystemSM runs CEGH (Central European Gas Hub) Gas Exchange of Wiener Boerse, the Hungarian Power Exchange, Sibiu Monetary Financial and Commodities Exchange (SIBEX) in Romania, the Jakarta Futures Exchange, Munich Stock Exchange, etc.
- Cinnober’s TRADExpress trading system runs Turquoise, Burgundy, and through an adaptations the Stock Exchange of Thailand (“SET CONNECT” system), The London Metal Exchange (LME), The Chicago Board Options Exchange (CBOE’s CBOEFLEX.net system), The Hong Kong Mercantile Exchange (HKMEx), etc.
- Deutsche Börse’s T7 trading system runs the Eurex derivatives market, the EEX (European Energy Exchange) Derivatives Market and an adaptation of the system (“BOLT Plus”) runs the Bombay Stock Exchange’s derivatives market
- The former BTS trading system from Ljubljana Stock Exchange is running the Macedonian Stock Exchange in an adapted version (Bourse Electronic System of Trading, “BEST”)
- A proprietary platform is shared by the Athens Stock Exchange and Cyprus Stock Exchange to run those exchanges.
- A proprietary trading system “MOST” runs the Zagreb Stock Exchange.
- A proprietary trading system “QUOTRIX” runs the securities market of Dusseldorf Stock Exchange
- A proprietary trading system “GEFOX” runs the closed-end funds market of Dusseldorf Stock Exchange
- A proprietary trading system “Xontro” runs Boerse Berlin
- A proprietary trading system runs IEX dark pool in the US
- A proprietary trading system “SIBE electronic trading platform” from Bolsas y Mercados Españoles runs the four regional stock exchanges in Spain
- A trading system developed by Merchants Association Collection Division Inc.’s (MACD) system under the name “Aixecute” runs the BX Berne eXchange.
- A proprietary trading system “BELEX/BELEXFIX” is running the Belgrade Stock exchange
Links between markets or between platforms rarely happen, although it exists and for the members that are only connected to one market or platform and not the other, it can provide access to this other market. This is different than the CSD domain, where many CSDs maintain links between each other to act as relay for their members that want to access accounts at foreign CSDs. In some cases (like in the US), there is however a regulatory requirement to have links between markets that only provide trading in securities that are listed elsewhere, and the home/listing market in order to bring unmatched liquidity forward to the home market.
Also, unlike CSDs, the cost to be member of a market is not that terribly high. If a platform hosts multiple markets, then it is not a big deal or investment to connect to multiple of those markets once one has already the technical connectivity to the technical platform that hosts them. The connection to the platforms, and possibly dealing with different platforms poses more problems. In case of markets, the main technique to connect to different markets is therefore via middleware from trading software vendors that offer a single graphical interface or terminal to the broker or trader, and that connect to multiple markets and platforms.
Examples of such systems that provide a pan-market or pan-platform access are:
- Order Management Systems from SunGard, Fidessa, Bloomberg, Ullink, etc
Some relevant news, especially with a focus on Europe:
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