The Tokyo Stock Exchange (TSE) is inviting financial technology vendors to tender for the contract to build its next generation electronic trading system.
According to the TSE, the developer will be asked to develop the following stock trading system functions: Order matching; Connection with Trading Participants; Market Data feed; Connection with other systems including the clearing system; and Trade surveillance. There will be three stages to the competition. An application screening will whittle the number of applicants down to five. The remaining applicants will then be presented with a “Request for Proposal” by the TSE, and after reviewing that, and examining the applicants rigorously, the field will be narrowed to two or three applicants. The TSE will then make a decision as to who the project developer will be. It aims to have chosen the new project developer by the end of December this year.
This competition follows a turbulent year for the TSE, caused by technological problems, which first surfaced on 1st November 2005 when the TSE had to suspend trading for three hours when its computerized trading system failed to start. Five weeks later the system failed to cancel a botched order placed by Mizuho, which led to a loss of $350 million for the bank. In January 2006 a flush of trading threatened to breach the daily deal limit at the TSE. The volume of TSE trade then began to rise much more sharply than expected, partly driven by technical factors such as increased order cancellation. In the past TSE spokesmen have said that there are plans to develop a radically new and flexible trading system. It seems that it is now time for that system to be created. The TSE must hope for a decent number of strong applications so that their technological problems are consigned to history.