The Hong Kong stock exchange will spend HK$1 billion over the next three years to build a lightning-fast data and processing centre that has caused much controversy overseas.
It will feature 'co-location' services, which allow broker-dealers to locate servers within the exchange's own matching engine, enabling it to process 100,000 orders a second.
Although officials said the venture was at an early stage, critics warned that such automated trading in a matter of microseconds contributed to market volatility. Its supporters say it enhances liquidity.
Such hi-tech trading was blamed for causing what was called the 'Flash Crash' in the US last year, when the Dow Jones industrial average plunged 700 points in minutes on May 6 and fell nearly 1,000 points to its lowest level that day.
In Asia, stock exchanges in Japan and India have boosted their turnovers by offering co-location facilities, which slash the time it takes for messages to get to and from the matching engine and knock microseconds off trading times.
In Hong Kong, high transaction costs, stemming from a lack of liquidity along with hefty stamp duty charges, have so far deterred investors from buying and selling shares at ultra-high speed.
Many global investment banks' broking arms already offer investors the ability to buy and sell Hong Kong stocks in a split second using their in-house supercomputers. But it would be even faster to use the exchange's data centre, and some said they would consider that if there was sufficient demand from clients.