JUST 11 trading days after its launch, the stock exchange's second off-floor trading system is already capturing more than a quarter of the volume. Last Friday, trading executed through the terminals, known as the second Automated Matching System (AMS), reached 26.7 per cent of volume, against just 10 per cent on January 25, their first day of operations. The deals going through the terminals average $126,500 against $116,000 for terminals on the trading floor. Members of the stock exchange can use the second AMS for either trading or back-up purposes. Only exchange members or general partners, dealing directors and authorised clerks are allowed to operate the new terminals. About 400 terminals on the second network are in brokers' offices, with 330 in operation. This compares with 900 terminals on the exchange floor, which some brokers believe could eventually disappear as the amount of trading through office-based terminals increases. Bigger brokers find it cost-efficient to trade from their offices while the smaller ones conduct most of their business in the trading hall. Brokers contacted on Friday said the volume of business going through the second AMS could only rise. Some factors are likely to slow that rise, including the need to find enough trained staff and more space for the terminals in broker offices. 'As soon as I've got the guys trained up and desks for them to work off we will lift our screens off the exchange floor,' one broker said. Those ready to move their screens off the floor tend to be the big institutional members. Small brokers will probably resist change for a long time. One dealer said: 'The truth will come out. For many of the really small operations they have no choice - their office is the stock exchange trading floor.' Smaller brokers usually have sales and dealing staff in the trading hall, used as an extension of their offices. The second AMS will become a lot more active in busy fast-moving markets when one terminal cannot cope with the volume of trades. At the time of the launch, exchange chairman Edgar Cheng Wai-kin said the second AMS would strengthen the exchange's ability to face any competition brought about by the possible evolution of other forms of securities trading. The advent of the second system is meant to place the exchange in a position to compete with any new electronic trading systems in the region. It also heralds the advent of direct dealing by customers who can execute deals through their own terminals in their own offices without having to go via a broker. Eventually the need to obtain a stock exchange seat to trade shares will also go by the way. At present they are valued at $10 million.
