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February 9, 2012 1:09 pm
Eurex, the derivatives arm of of Deutsche Börse, on Thursday revealed plans to cut derivatives trading speeds by more than half to attract high frequency traders and put its parent’s failure to merge with NYSE Euronext behind it.
The German exchange said it would roll-out a new trading system later this year in a move which highlights the continued technology war being fought between the world’s exchange groups.
Many bourses are looking to attract the business from investors that use high frequency and automated trading software but are faced with a constant battle to make improvements to the speed and reliability of their trading platforms. Improving the efficiency of trading times is known in the industry as “latency”.
However most of the war has been fought over improving trading speeds for simpler cash equities products. Rival exchanges, such as Nasdaq OMX and the London Stock Exchange, are able to execute trades in around 100 microseconds.
The new Eurex system will be based on a version operated by the International Securities Exchange, the US equity options exchange owned by Deutsche Börse.
Jürg Spillmann, Eurex’s deputy chief executive, said the ISE system was delivering average latency of about 220 microseconds, compared with a current average time for futures transactions on Eurex of about 600 microseconds.
The German exchange group had been planning to introduce a new proprietary trading system for several years but it was not until last year that a first version, known as Optimise, was introduced at the ISE.
A drive to streamline and integrate trading systems was one of the ways that Deutsche Börse and NYSE Euronext planned to obtain cost synergies from the planned merger before it was called off last week.
The European Union’s competition commission blocked the tie-up, partly on concerns that Eurex would have enjoyed excessive market dominance through its integration with Liffe, the derivatives exchange owned by NYSE Euronext.
Deutsche Börse said the new Eurex system would also cut the time it would need to introduce any new products developed. Roll-out of the system is set to begin in December, with exchange products moved in stages from the existing infrastructure. A transition could be completed within the first quarter of 2013.
Deutsche Börse said interfaces for the new Eurex platform would be based on industry standards, helping exchange participants implement the system. Mr Spillmann said the plan amounted to a “complete overhaul of our trading architecture”.
Eurex is 85 per cent owned by Deutsche Börse, which last year agreed to buy out the 15 per cent share controlled by SIX, the Swiss exchange group, regardless of the fate of the NYSE Euronext merger plan.
Completing the acquisition this year as planned would contribute about €100m to Deutsche Börse revenues, Reto Francioni, chief executive, said this month. Deutsche Börse is to announce annual results next week.
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