Exchanges Seek Global Expansion

Terry Flanagan

As the global capital markets become more interconnected, exchange operators continue to expand their connectivity capabilities.

Exchange operator Deutsche Borse plans to gradually roll out an expansion of its global network over the next several months. The announcement comes a week after it said it would launch a new trading system on its Eurex derivatives trading platform.

“After having successfully introduced our global trading infrastructure at our US options market International Securities Exchange, we are now taking the next logical step in Europe,” said Michael Kuhn, Deutsche Borse AG’s chief information officer.

The focus of the expansion is on the optimization of latency system stability. The further upgraded network will link the key financial centers with Deutsche Borse Group’s trading systems and its co-location data center in Frankfurt. The new upgrade will benefit Deutsche Borse’s approximately 140 co-location users in particular.

Deutsche Borse’s Eurex platform expects to launch a new trading system by year’s end. The first rollout will start December, pending regulatory approval, followed by a migration phase, where products will be moved from the current system to the new system. It took about three months for affiliate International Securities Exchange to complete the rollout of Optimise, on which the new Eurex technology will be based.

The new technology will include a flexible operating system, an internal messaging architecture for minimum latency, high speed communications and reliable database systems. In the future, time-to-market for introducing new products and features will be significantly reduced. And, new tools for further strategy and spread trading will also be delivered.

The new trading system will be based off the Optimise architecture used at the International Securities Exchange, the U.S. based options market owned by Frankfurt-based Deutsche Borse. Jointly developed by the technology teams at Deutsche Borse and the ISE, the company touts Optimise for its speed, performance, efficiency, capacity, throughput, reliability and availability. The platform, which runs out of two data centers, reduced latency compared to the previous system by about 90%, according to the ISE. Because of the flexibility of the technology, it can be adapted to serve as the backbone of all the Deutsche Borse Group Exchanges.

Since implementing its Optimise trading platform in April 2011, the ISE has seen steady gains in market share and order flow as volatility reached year-to-date highs and order flow spiked to record levels. It was the second largest equity options exchange for January, with market share of 18.7%, excluding dividend trades. The ISE plans to provide updates to the platform every two months, with two releases coming in the first third of 2012.

The announcement comes after NYSE Euronext and Deutsche Borse said they would focus on their individual strategies, cancelling their merger after EU regulators nixed their deal. The dominance that the combined Eurex and NYSE Liffe would have in European exchange-traded derivatives was the main hang-up for the regulators.

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