The New Zealand Stock Exchange is moving to a Linux platform for its settlement and clearing system, replacing its existing HP NonStop platform and applications in order to reduce cost and increase flexibility.
The delivery of “phase one” is due at the end of February, and the whole system is expected to go live in Q4 this year, completely replacing the current system, says Stuart Turner, NZX’s head of strategy and projects, who leads the project.
Brokers will be required to adapt their back-office systems, and “unfortunately, that is not without cost,” says Turner.
“Brokers are clearly concerned about such a major change but we have a great deal of interaction with them as we work together to make the project a success for the industry,” he says.
Prior to joining NZX in 2006, Turner was the head of market operations for the Dubai International Financial Exchange, where he set up the DIFX clearing, custody, and settlement system. The new system here is a newer version of that, he says.
NZX decided to develop new technology primarily because of the limitations the legacy system, the Fully Automated Screen Trading and Electronic Registration system (FASTER), put on the organisation. FASTER can only clear and settle equities and debt products, and is unable to do, for example, carbon trading, says Turner. There are also other problems, typical for legacy systems, such as expensive hardware and expensive system software, he adds.
The new system, provided by Tata Consultancy Services (TCS) in India, runs on Linux, he says. TCS also built FASTER.
The new technology will give NZX the ability to clear and settle a whole new range of products that it couldn’t do before, says Turner. It also allows NZX to use a clearing and settlement methodology which is more common in the rest of the world, he says.
Another benefit is the modular approach of the system, which makes it relatively easy to deploy, says Turner. In addition, as one of many customers of TCS’ system, NZX benefits from developments in other parts of the network. For example, in Dubai Turner developed ISO 15022 messaging — a securities messaging standard. “And this time, it is all there,” he says. “That work is done.”
Until now, NZX firms have been connected to FASTER, a real-time electronic securities exchange. The new system will replace it completely, says Turner, but NZX is keeping many of the features of FASTER, such as its seamless integration with the registries.