Chicago-based Trading Technologies, an independent software vendor specializing in electronic exchange interfaces, plans to link its front-end software with trading engines employed by the New York Stock Exchange, Nasdaq, the Chicago Board of Trade (CBOT) and Chicago Board Options Exchange (CBOE) by year-end. In addition, the ISV expects to develop connectivity to Instinet Corp. and Datek Online Holdings' Island--a pair of popular electronic communications networks (ECNs)--within the next four months.
In May, TT plans to link its flagship X Trader front end with the trading engine of the International Securities Exchange--the all-electronic options market that is scheduled to make its debut next month (ETW, 12/20/99). Around that same time, the ISV will provide its clients with access to the NYSE and Nasdaq, says TT chief executive officer Gary Kemp. X Trader, he says, will be linked directly to the NYSE's CMS platform and Nasdaq's Financial Information Exchange (FIX)-compliant Level I and Level II trading engines.
Two months after going live with connectivity to the two largest U.S. stock exchanges, says Kemp, TT will roll out interfaces to the nation's two biggest ECNs--Island and Instinet. X Trader, he says, will be "plugged into" Island and Instinet's FIX engines.
TT also expects to have the ability to access other ECNs through SelectNet--Nasdaq's order routing system. But Kemp does not expect TT's clients to use the SelectNet option too often, since it will not be nearly as fast as the ISV's direct connection to the matching engines of Island and Instinet.
Currently, TT is not considering building direct interfaces to other ECNs. "Our customers would like to see us connected to all of the ECNs. But most of them have labeled Island and Instinet as being the primary ones they're interested in," says Kemp.
Following its development of interfaces for the equity markets, in August, TT expects to go live with a link to the CBOT's platform. At that time, the CBOT is scheduled to transition from its incumbent Project A system to Eurex's trading engine.
Soon after the CBOT's conversion, TT plans to provide its clients with an interface to an electronic trading system the CBOE is developing. Faced with the prospect of increased competition from the ISE, Kemp says that the CBOE will in the third quarter launch an automated trading system that will run side-by-side with its floor. "Their new system, apparently, will run parallel to every contract traded on the floor," he says.
At some point, Kemp says, the CBOE may determine that it has enough liquidity on its new trading system to abandon floor trading. "As the ISE starts . I think that there will be business impetus to accelerate an all-electronic transition at the CBOE," he says.
Though TT has made strides in Europe and is about gain a presence in the U.S., the vendor has yet to make any inroads in the Far East. For the most part, says Kemp, TT "does not have an Asian presence." Partly, he says, that's because TT has not heard enough client demand to build electronic links to markets in Singapore and Hong Kong--or Sydney, Australia, for that matter. "We definitely have demand from our customers to access those markets. But it's not on same level as we have for the North American and European markets," Kemp explains.
That said, he concedes that TT's clients have been "pushing hard" for the ISV to build an electronic gateway to the Tokyo Stock Exchange. Unfortunately, Kemp says, there are a handful of regulatory and technology barriers that restrict access to that market
In terms of technology, Kemp says that the exchange makes use of an "extremely old, technologically defunct" trading platform. Eventually, market forces may compel the Tokyo Stock Exchange to adopt a more modern trading system.. But Kemp says that it will be no small task to convince the exchange to make such changes. "It's almost impossible to do that. It's like trying to resurrect the dinosaurs," says Kemp.