After years of elaborate preparations and several tests on the whole market, the New Generation Trading System (NGTS) of the Shanghai Stock Exchange (SSE) will be put into operation on November 23, 2009 upon approval by the China Securities Regulatory Commission. Systems directly connected to the SSE such as that of the securities companies will be simultaneously switched at that time.
Putting the new trading system into use is a systematic project covering wide areas and involving complicated technologies. The SSE has made careful and ample preparations to ensure the smooth operation of trading.
What’s more, the bourse has formulated relevant contingency plans for possible risks. In case of any abnormal trading resulting from malfunction of the system, the bourse will take necessary measures in time according to the “Detailed Implementation Rules on Handling Abnormal Trading of the SSE (Trial)”. If the trading can not be carried out in a normal way due to the system’s malfunction, the bourse will close the market. And if the trading can not be resumed on the day when the system goes wrong and on the following day, the bourse will switch back to the existing system for trading.
Q&A by SSE on Switch, launch of New Trading System (NGTS)
Q: Would you please introduce to us the construction of the SSE new trading system and the significance of its launch?
A: Thanks to the rapid development of China’s capital market in the last few years, the SSE’s stock trading volume grew by leaps and bounds from the daily average of RMB7.156 billion in 2002 to RMB138.8 billion in 2009. As links at China’s securities market, including issuance, listing, trading and communication, heavily depend on technology, the market keeps propelling us for technical innovations. From the perspective of the global market, the upgrading of trading system is inevitable for market development.
Since November 2004, the bourse has been well on the way to the development of the new trading system. By October 2007, the overall design and software development of the system had been completed, with about 160 key documents under 53 subclasses of 13 categories compiled and approximately 1 million lines of codes for pure source program delivered. The model of the online version, finalized in April 2009, has been at the stage of synchronous operation and maintenance since late June. At present, the last-minute preparations for the switch are under way orderly.
The SSE’s new trading system, inheriting the advantages of the current system, learning from the characteristics and merits of overseas stock trading systems and meeting the long-term development needs of China’s capital market, is a fruit of technical integration and re-innovation.
The smooth launch of the new system, a booster of the bourse’s core competitiveness, is of great importance to the construction of the SSE into a world-class exchange in terms of technical security. First, the SSE provides a powerful guarantee for future market development through improvement in processing and safety capability of its trading system. The new system boasts a peak order processing rate of about 80,000 orders per second, with an average order delay 30% shorter than the current one. The system’s daily bilateral volume of not less than 120 million orders is equivalent to the daily volume of RMB1.2 trillion on a single market and quadruples the maximum peak value ever recorded in the bourse, with a capability of parallel expansion. Moreover, the system, technically more reliable, is capable of ensuring the steady operation under the circumstance of peak data flow. Second, a solid foundation is laid for the SSE’s exploration into international business by ensuring easier access to the technical interfaces for all participants at home and aboard. Third, the SSE’s role in leading industry technical advancement is given full play by tapping up the new channel to future upgrading of technical systems of its members and other market participants. Fourth, an ideal platform is established to support the SSE’s simulated transaction business, custody business, multi-variety-and-platform business in the future.
Q: What are the arrangements for the switch of the old trading system to the new one and the launch of the new system?
A: The launch of the new trading system is scheduled for November 23 (Monday). The switch and launch falls into three stages: 1. Launch preparation period: all pre-launch preparations will be rounded off before 24:00 on November 20 (Friday). 2. Switch period: the switch from the current system to the new one will be wound up between 00:00 on November 21 (Saturday) and 24:00 on November 22 (Sunday). 3. Trial run period: focus will be put on the operation of the new system to eliminate possible risks from November 23 to December 4. After the end of the trial run, the current system will be shut down. During the trial run period, in case of failure in normal transactions due to technical drawback of the trading system, the SSE will announce market closure. If the trading on the very day and the following day can’t be resumed due to melt-down of the new trading system, the SSE will fall back on the current system for trading resumption.
Q: What preparations has the SSE made for the launch of the new system?
A: The SSE, in the principles of active preparation, steady promotion and step-by-step implementation, has devoted countless hours to the careful preparations for the launch of the new system. So far, preparations for the new system in terms of system, market and bourse have all been in place.
First, the system is ready to go. Since June 2009, the SSE has organized several rounds and batches of all-around tests, special pressure tests and special destructive tests participated in by market participants with a view to verifying the system’s functionality in usability, robustness, high capacity, anti-destructive attack, network monitoring and system monitoring as well as the operating team’s response competence.
The 3 all-around online tests organized by the bourse since October this year have achieved expected results, indicating that the new system is qualified for its launch.
Second, the market is fully prepared. With the completion of prophase laboratory test, on-the-spot access test and overall market training, the SSE officially kicked off the preparations for the launch of the new system by market participants in May 2009. In July and August this year, all market participants including securities companies and fund companies were grouped into 6 batches and underwent 7 all-around tests. According to the inspection results of examination and acceptance, all market participants have completed their preparations for technology and business. The subsequent 3 all-around online tests further proved that all member units and other market participants have got everything ready for the launch.
Third, the bourse itself is ready. After elaborate preparations, the business operation platform of the trading system, the internal business process, the trading hall, the business operation team, the contingency treatment mechanism related to the new trading system as well as the service integration with the back-end depository and clearing system are ready. All this ensures the smooth operation of the new trading system upon its adoption.
Q: What measures have the SSE formulated to ensure the launch of the new trading system?
A: To ensure the smooth and safe launch of the new trading system, the SSE has established a command center for overall direction and coordination during the switch stage. The command center is divided into five working groups of technology switch, technology operation, business operation, relevant systems and comprehensive affairs. In the “special guarantee” month for the adoption of the new trading system since November 2, the SSE will take guarantee measures at the highest level according to the system switch progress.
Besides, the SSE has also made thorough arrangements on the following issues. To begin with, it has strengthened the risk prevention capabilities of member units, keeping close watch on those large in scale with complex technical system, those under reorganization currently, those adjusting the technical systems before and after the launch of the new trading systems, and those lagging behind in technical strength. The SSE has set up a technical service group to provide technical support for members at any time. Meanwhile, a service hotline for the launch of the new system is open to keep in touch with the market.
Next, the internal risk prevention of the bourse has been intensified. In line with the principle of “prevention first, quick response, timely disposal and less impact”, the SSE has kept improving its ability of quick response, recognition and disposal towards all kinds of risks and relevant technical failures based on the previously formulated contingency schemes.
Lastly, the implementation of businesses spanning over one day will be suspended. The SSE will suspend the implementation of businesses spanning over one day related to the product issuance such as the IPO of new products (A shares, B shares, bonds, funds and warrants) and additional issuance from three working days before the adoption of the new system to five working days after the successful switch (from November 18 to 30).
Q: How will the adoption of the new trading system affect the securities companies and other market participants? What are the SSE requirements upon them?
A: While the new trading system is put into operation, systems of the securities companies and other market participants that are directly connected to the SSE will be simultaneously switched to the new system. Market participants shall, in accordance with the general planning of the SSE on the adoption of the new system, make relevant technical and business preparations to ensure the safe and smooth launch of the systems directly connected to the SSE.
In its “Notice of Making Preparations for Launch of New Trading System” in May 2009, the SSE required that the securities companies, fund companies and relevant market participants form the special working groups led by their senior management members. In the recent mobilization meeting of the whole market, the SSE asked all units to, in the light of its organizational mechanism and safeguarding measures, pay much attention to and spare no effort in the implementation of various work as required. The SSE also specified in a notice the following requirements: firstly, market participants shall carefully study relevant documents on system switch and do a good job in publicity and mobilization. Secondly, they shall form the working groups for the switch and designate personnel in charge. Thirdly, apart from keeping the communications smooth and efficient, they shall give the feedback in time if any problem should crop up. Fourthly, they shall work out the operational schemes and contingency plans for the system switch on the member’s side. Related personnel shall be know how to carry out relevant processes and plans to avoid manual operating errors.
Q: How will the adoption of the new trading system affect the investors?
A: The previous trading methods of investors who are directly using the business systems of various securities companies will not be affected by the adoption of the new system. Undoubtedly, the shift of the new system into use is a systematic project covering wide areas and involving complicated technologies. The SSE has made corresponding contingency plans for possible risks to minimize the influence on the investors’ trading.
The new system, yet to-be-launched, with improved match efficiency and ability, safeness and reliability, will allow the investors to trade in a safer, easier, more fair and efficient way.
Q: What contingency measures have the SSE adopted against the emergencies that may crop up in the launch of the new trading system?
A: To ensure a safe system launch, the SSE will promptly deal with the abnormal conditions during the launch according to the issued “Detailed Implementation Rules on Handling Abnormal Trading of the SSE (Trial)”. Firstly, it perfected its contingency plan regarding all possible risks during the system launch and perfected the specific measure for each risk and breakdown situation. Secondly, it established the joint contingency mechanism with China Securities Depository and Clearing Corporation Limited to deal with all kinds of risks involving the registration and settlement during the new system launch. Thirdly, it issued the “Guidance on Contingency Treatment for Market Participants’ Trading of the SSE” to urge the market participants to form the working groups of trading contingency treatment during the trial run period. The working group shall work out the contingency plans and direct the contingency treatment. In addition, the SSE also tried to maintain the market stability through sufficient communication with the investors.
Source: SSE, 17.11.2009
Filed under: Asia, China, Exchanges, News, Risk Management, Trading Technology, Clearing and Settlement, CSRC China Securities Regulatory Commision, NGTS New Generation Trading Systems, Risk Management, SSE Shanghai Stock Exchange, Trad, Trading System