Two last-gasp tests offer HKATS hope
The futures exchange has set two more tests for its troubled electronic trading system in a final bid to shift Hang Seng Index (HSI) futures and options to electronic trading this year.
The two simulated trading tests on the Hong Kong Automated Trading System (HKATS) would be held on September 4 and 11, according to a circular given yesterday to the exchange's 130 futures brokers.
These would be the eighth and ninth tests, following seven failed tests since June.
'Should these tests yield positive results - and subject to the concurrence of independent consultants and the approval of the SFC [Securities and Futures Commission] - the exchange would plan to migrate both HSI futures and options simultaneously in 1999,' the exchange said.
The exchange must complete the switch of HSI futures and options to electronic trade on HKATS by the end of this month to avoid postponement of the move to next year.
The Government has banned new computer-related projects in the fourth quarter of this year to avoid Y2K problems.
The futures exchange missed an August 2 target for the start-up of the migration plan because of the failed tests.
The exchange said in the circular that the last test on August 21 failed because of a malfunction in the order-depth window.
It said the problem would be solved before the next test.
Futures exchange chief executive Randy Gilmore resigned suddenly on Monday.
Sources said his departure was related to the delay of the migration plan for HSI futures and options.
Some brokers speculated the exchange might need to scrap HKATS and replace it with another system.
They also suggested the proposed new trading system of the stock exchange - the third generation of the Automatic Order Matching and Execution System (AMS/3) - might be a better choice to carry out the trade of futures products.
However, a futures exchange source said there was no plan to abolish HKATS.
He said the exchange had invested $100 million in the system.
Brokers had invested almost the same amount in upgrading their own computer systems to make them compatible with HKATS, he said.
Standard Capital Brokerage executive director Louis Tse Ming-kwong said the use of AMS/3 in the trade of futures products would be convenient for brokers who trade in stock and futures.
However, he said such a move would waste too much time and money.
'We have spent a lot of time and money [on] the HKATS,' he said.
'It is better to improve it rather than switching to another system.' Moreover, Hung Sing Securities director Gilbert Cheung Yik-cho pointed out AMS/3 would be launched next year and its effectiveness in the trade of futures products was not assured.
Mr Cheung said the futures exchange should modify and enhance HKATS.