While it's not the largest equities market, the Johannesburg Stock Exchange is seeing the same shift to high frequency and algorithmic trading that is happening at some of the largest markets in the world.
The JSE, which has a market capitalization of approximately $825 billion and lists 333 South African companies and 386 companies overall, has made significant upgrades to its technology infrastructure -- including building a new data center -- and has moved the exchange's matching engines back to Johannesburg from London. "It has been an 18-month project, but [the data center] is positioning the exchange for growth," says Leanne Parsons, director, Equity Market, at JSE Limited.
The JSE essentially "outgrew" its presence in London, says Parsons. "Last year we moved the matching engine that used to be in London to Johannesburg."
The move to a data center in Johannesburg has reduced latency for international clients, Parsons reports. "We have seen growth in our markets and we did a massive upgrade to our data center at the end of 2011," she says. "The latency has actually gone down now that we have the matching engines at the JSE."
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With the matching engines in London, messages had to make two roundtrips to the JSE. Now, messages only make one round trip to the exchange's matching engines. "It takes 380 microseconds from placing an order to receiving confirmation," Parsons says. Previously it took 200 milliseconds for a client to receive a confirmation.
The reduction in latency has helped as volumes continue to rise. "The message count is constantly growing, but with the matching engines at the JSE, we are now getting consistent latency which is most important," Parson says.
Colocation NextNow that the matching engines are in place, the JSE is working on providing colocation services to brokers. "In 2014, we will offer colocation services at our data center to help grow the market," even further, Parsons reports. The JSE is building out the colocation capabilities to hold 35 racks. Initially, the JSE will go live with 20 clients.
"We just want to make sure we get the right level of support for clients" before filling out the entire colocation capabilities, Parsons says. Most of the colocation clients will be trading in the cash equities market. Other colocation tenants will include market data providers. In addition to the equities market, JSE also has markets in equity, currency and commodity derivatives, as well as a bonds.