With turnover close to HK$200b, new HKEX platform can handle 60,000 trades per second

The state-of-the-art Orion Trading Platform will replace the 17-year-old AMS/3.8 system on February 5, while an innovation lab will be launched this year to explore fintech for the bourse and its customers

PUBLISHED : Wednesday, 24 January, 2018, 3:14pm
UPDATED : Thursday, 25 January, 2018, 12:31am

Hong Kong Exchanges and Clearing will launch a new stock trading system next month, as it upgrades the bourse infrastructure to handle rising volumes and turnover that is approaching HK$200 billion (US$25.5 billion).

“It would be hard to predict if this daily turnover level will be the new normal,” said Charles Li Xiaojia, chief executive of HKEX, at the media lunch on Wednesday. “We are now back to the turnover seen in 2015, but we believe the current market situation is more sustainable than it was in 2015.”

Even though turnover reached HK$198.9 billion on Tuesday, it is still some distance away from the record high of HK$293.9 billion achieved on April 9, 2015. The average daily turnover in the first three weeks of the 2018 stood at HK$152 billion, almost double the HK$88.2 billion in 2017.

The rising turnover comes as the benchmark Hang Seng Index continued to set new all-time highs last week, thanks to the capital inflow from mainlanders via the Shanghai and Shenzhen stock connect schemes. Mainlanders now represent between 6 to 10 per cent of daily market turnover in Hong Kong.

Li said the record turnover in 2015 was driven by the rally of A-share market, which dropped substantially when the mainland’s markets crashed in the summer of 2015.

He, however, expects the current trend of increasing turnover in Hong Kong will be sustained for a bit longer because the rally will last longer.

The new trading system will help to cope with the rising trading volume. The Orion Trading Platform can handle up to 60,000 transactions per second, twice that of the current system and has the capability to be expanded further.

The system will go live on February 5, replacing the AMS/3.8 system which has been in use for 17 years.

The turnover is expected to increase further as HKEX is in the process of launching its ever largest listing reform in three decades to allow large biotech companies with no revenue and giant dual class shareholding companies to list in Hong Kong from June. The new measures are expected to attract more mega IPOs of technology and new economy companies.

“Completing the listing reform is one of our priorities in order to secure our relevance as a premier global capital formation centre,” Li said.

“We have already received some enquiries about listing under the new regime and we are targeting to complete the consultations regarding details on the rule changes by the end of this quarter,” Li said.

HKEX will this year establish an innovation lab, which will hire a small team of people to source and develop fintech for the exchange and its customers, said John Killian, the exchange operator’s chief financial officer.

“This is not a new trading division for the company. Rather, it is a unit to explore any applications or new technology that could be for the internal usage of the HKEX. If the lab will found any fintech or other applications that could be useful for our customers, we will recommend that as well,” said Killian, a former investment banker at Goldman Sachs who joined HKEX in December and replaces Paul Kennedy, who retired.

Killian said artificial intelligence and other technologies could be helpful to the work of HKEX. For instance, there is an AI tool, which HKEX is exploring, that could aid the compliance and monitoring function of listed companies.