Bolsa de Valores de Colombia and the Technology Around MILA
Fri, 03 Jun 2011 09:09:00 GMT
Earlier this week, the stock exchanges of Colombia, Chile and Peru came together to form MILA, the Integrated Latin American Market. MILA will enable cross-border trading and common access between the Bolsa de Valores de Colombia, Chile’s Bolsa de Comercio de Santiago and Peru’s Bolsa de Valores de Lima.
I spoke with Jitendra Puri, Chief Information Officer of the Bolsa de Valores de Colombia, to find out more about about his exchange’s plans regarding technology, particularly if there are any opportunities that the new integrated market may offer around high frequency trading.
High Frequency Trading Review: Jitendra, can you tell us a little bit about how you are using technology to grow the business on BMV and across MILA?
Jitendra Puri: Certainly. I guess you know that we are dealing with technology vendor Rapid Addition for some of the most important components we need for MILA going forward, for order routing between the three exchanges, for the trading system, for the front end, for DMA and for algo trading. However, we have to take it step by step and we need to ensure we can walk before we start running.
Over the last five years, we’ve revamped a lot of things at the exchange. From a technological perspective, we implemented one common platform for derivatives and equities, X-TREAM, which we acquired through NASDAQ OMX.
But before we could actually go out and start to integrate with other exchanges, and before we can aspire to do some of the other things that are going on in the US and Europe, we needed to put our own house in order first. So what we’ve done is changed our trading platform and implemented our SOA infrastructure for integrating all these services together.
It has taken us a few years to get there, but now having done that, we want to grow. Colombia is a small market; if we want to grow, we actually need to redefine our market boundaries. And we’ve redefined them at Latin American level, which is what you see today with MILA.
HFTR: What exactly is it that’s being integrated? And how does that integration work from a technology standpoint
JP: Integrating MILA – Chile, Peru and Colombia – anybody in these three markets will be able to buy and sell stocks as if they were in their own country. And that’s by virtue of integrating market data and orders between the three exchanges. However, each exchange maintains its own technology. For example, we have X-TREAM, Peru has their own technology that they have had for years and Bolsa de Comercio de Santiago in Chile, they have also their own home grown platform. What makes them all talk together is FIX 4.4.
From BVC’s standpoint, we selected Rapid Addition for three elements of the infrastructure. The first is the FIX Gateway, a FIX Hub, which will actually route orders from and to Colombia.
The second part is the risk management element. In this phase of MILA, all orders dropped into Colombia need to be sponsored by a local broker in Colombia, the brokers need to have their own risk limits and agreements with foreign brokers, who will be able to send orders based on limits that the local broker reports.
HFTR: Is that a standardized pre-trade risk model across all the sponsoring brokers?
JP: Certainly in Colombia it’s standardized. Anything that comes into Colombia, the sponsoring brokers who offer access into the Colombian exchange have standardized pre-trade risk and that system is provided by us, so that they can all use the same system rather than developing individual systems in-house, which provides economies of scale.
HFTR: And the third element?
JP: The third part is one common front end, one OMS where you can see the market data of the three markets and you can route orders to any of the three markets. For this, we use U-Trader from Rapid Addition, which was fairly basic when we started but many things have now been added, thanks to our project. It looks really rich in functionality today compared to the early version.
HFTR: Can you elaborate on the various ways different members can connect and route orders into the exchange?
JP: In Colombia, we use X-TREAM as our trading platform, so most brokers use the X-TREAM front end that’s provided by the BVC. Some brokers have moved away from these screens and have built their own internal systems for order routing and for e-trading. They connect directly to our FIX XML interface, which provides them with the market data as well as the order routing facility. That’s based on the core technology, FIX XML 5.0, but not everybody is on it yet, so when we talk about international connectivity, it’s more common for people to want to connect via FIX 4.4.
For anybody in Colombia who wants to trade only Colombia, they currently have three options: use the X-TREAM front end, use the FIX interface on FIX XML, or (as of this week) use U-Trader, because you can use U-Trader for orders not just to Colombia but also to the other two MILA markets. Besides this, we can also offer interconnection through FIX 4.4 for market data and order routing to MILA.
HFTR: Are any members doing any kind of “black box” trading via direct connection?
JP: In Colombia, not yet, but there’s a lot of talk going on. On the equity side, we have about 30 brokers. There are about five or six of those brokers who have strength in this area, who really invest in technology and who are looking beyond what they do today. They are thinking about black box trading and high frequency trading, but the discussion is just starting. It’s not practiced right now in Colombia, there’s no HFT yet, there’s no algo trading going on (as far as we know!)
HFTR: But the infrastructure is starting to be put in place to allow it to happen in the not so distant future?
JP: Correct. For example, the capacity of the X-TREAM platform goes up to 5,000 orders per second (across the market, not per member gateway), which is quite a substantial capacity for the size of market we are in right now.
HFTR: Do you limit members to only sending a certain number of order per second?
JP: As yet, we haven’t set any of those kind of limits or throttles, because with the X-TREAM front end, you can only send as many orders as you can physically submit, depending upon on how many hands and eyes you have. But when we have the brokers migrating to FIX and when black box trading and HFT comes in, then we will have to set certain limits. For instance in Brazil, I understandthat they have set a limit of up to 20 orders per second, per member gateway.
HFTR: You went live with MILA earlier this week. What’s next?
JP: The next phase is connecting BVC to all the international DMA platforms. We are in talks with many of the DMA vendors such as SunGard, Marco Polo, Bloomberg, etc. We want to open up the gates so that the order flow can come from anywhere. There’s a lot of interest from Europe, especially UK. There are also a lot of investors in the US who want to target Colombia.
And now with MILA, once you’re connected to Colombia, you can route orders from Colombia onto any other connected market in Latin America.
HFTR: Thank you Jitendra.
We would be very interested to hear feedback from readers who have traded (or are planning to trade on) either Bolsa de Valores de Colombia, Bolsa de Comercio de Santiago or Bolsa de Valores de Lima. What are the challenges you face? What technology infrastructure do you use? What sort of strategies are you running? How do you manage risk?
Your comments and feedback are always welcome.