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Finance : Finance and Investment: JSE’s New Equity Derivatives Trading System Goes Live


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The JSE’s long-awaited new equity derivatives trading system went live in Gauteng yesterday. The new system will be particularly appealing to brokers, fund managers, market makers and other institutional investors as it brings with it new functionality and thus greater flexibility.

“It has taken the JSE longer than anticipated to get the new system implemented. However, since this was a total replacement of the 15-year old system we inherited when the JSE bought SAFEX and not merely an upgrade, we had to be absolutely certain that we’d catered for the needs of the equity derivatives market which are quite different today than they were 15 years ago,” said Allan Thomson, Director of Trading at the JSE.

The new system has been specifically designed for the South African equity derivatives market which, in a number of instances, is a world leader as far as these markets are concerned. The JSE’s stature as the largest Single Stock Futures (SSF) market in the world in terms of number of contracts traded and the recognition it received recently by the international derivatives fraternity for developing the most innovative product of the year, namely Can Do Options, are good examples.

“The flexibility of the new system allows us to introduce even more product innovation and hence should bring increased liquidity to the market, something which any world class exchange strives to achieve,” added Thomson. It also brings greater visibility to the market with live on-screen prices for SSFs and Single Stock Options being available to the market for the first time. Traders will also see the narrowing of spreads as a result of the increased functionality of the new technology.

“As the 11th largest derivatives exchange in the world by volume, we’ve always recognized that one of the ways to remain one of the world’s leading exchanges is to ensure that we use technology to our advantage. This system replacement is a case in point. Wholly designed by local South African company, STT, the system is not only cost efficient but has applications which have already drawn the attention of other pre-eminent exchanges around the world. “

STT were the developers of the original trading and clearing software which has been in place since the start of electronic trading in Gauteng in 1994. Said Michelle Janke, Managing Director at STT: “These systems had to be enhanced to meet the changing needs of the exchange, notably the increased derivative volumes trading. But the time has come for the original system to be replaced. The new systems will eliminate a large amount of manual processes and provide the exchange with the flexibility that they require. Options trading volumes using complex delta neutral products have also been improved. To attract further liquidity, the system is focused on maximizing the number of prices displayed, by using complex algorithms.”

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