The Johannesburg Stock Exchange’s (JSE) partnership with Cinnober to develop a multi-asset clearing platform is expected to deliver not only real-time clearing, but also overall trading improvements and greater market certainty.
The contract between Cinnober and the JSE to build a real-time integrated clearing platform initially handling six asset classes was signed last week. Implementation of a customised version of Cinnober’s TRADExpress RealTime Clearing system by the partners is due to start soon, with delivery of the platform to the exchange in the first quarter of 2015 and the exchange then deciding when to go live. The platform will replace a number of clearing systems covering different asset classes, some of which have been built in-house and others sourced from local partners.
Riaan van Wamelen, chief information officer at the JSE, says: “Modern clearing requirements and the evolving regulatory landscape result in significant technology demands for exchanges worldwide. The project we are embarking on seeks to process all asset classes from all markets on a single integrated solution and will enable our strategy for growth.”
While this is a major project for the JSE, it is a first win for Cinnober at the exchange, which uses the London Stock Exchange’s Millennium Exchange technology to power some of its equity trading systems. Other trading platforms, like the exchange’s clearing systems, are in-house built or provided by local suppliers, begging the question of whether a successful implementation of the Cinnober clearing platform could open the door for the company to provide an integrated trading platform.
Meantime, the implementation of the clearing platform is expected to lead to some trading improvements. Cinnober CEO Veronica Augustsson explains: “The platform will provide JSE clearing and trading members with a real-time view of risk, while the integrated clearing of asset classes will provide a view of net risk, which means clearing firms shouldn’t have to post unnecessary collateral. There is lots of value for clearing firms to pass on to trading customers and overall trading should improve as a result of real-time clearing, making the market more certain. For example, if an algorithm being used in high frequency trading goes wrong, it is possible to see in real time positions that require more than there is coverage for. This is good for the market and helps to build confidence.”
Cinnober is conducting implementation and integration projects similar to the JSE project at LME Clear and BM&FBovespa, and says there are more to come as organisations realise the need for integrated clearing platforms to reduce high, and sometimes prohibitive, costs of collateral.