Presentation On AMS/3 (I) Overview (II) Functions

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Presentation On AMS/3(I) Overview (II)
Functions Capacity (III) Standards(IV)
Preparation for Rollout
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(I) Overview
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Overview

• AMS/3 provides a reliable trading system for
  investors, Exchange Participants and market
  participants.
• AMS/3 provides a trading infrastructure which
  connects investors, Exchange Participants and the
  central markets through eCommerce facilities.
• AMS/3 can bring benefits and business
  opportunities to the Hong Kong securities market.

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AMS/3 consists of five major components Host,
Trading Terminal, Multi-Workstation System (MWS),
Open Gateway (OG) and Order Routing System (ORS).
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Benefits

• After its full implementation, AMS/3 will bring
  the following benefits to investors, Exchange
  Participants and the market.
• To Investors
• Enable investors to have access to the central
  market through additional channels via Exchange
  Participants
• Place trading requests anywhere and anytime via
  Internet and mobile phone
• Allow efficient access to trading request
  processing status

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Benefits of AMS/3

• To Exchange Participants
• Increase Exchange Participants order throughput
  per trading right
• Allow improvement of operational efficiency
• reduce manual work to handle investors
  trading requests, answering enquiries about
  order status
• better order management for traders

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Benefits of AMS/3

• To Exchange Participants
• Allow for more efficient risk management through
  electronic investor authentication and built-in
  credit control function

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Benefits

• To Hong Kong
• Improve the Hong Kong securities markets
  competitiveness
• higher market accessibility and trading
  efficiency will help attract more market
  participation
• provide market infrastructure of higher trading
  capacity
• allow multiple-market trading platform and
  flexible trading hours
• set the path for the future implementation of
  straight- through processing

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Benefits

• To Hong Kong
• A market accessible by global investors
• contribute to the globalisation of Hong Kong
  securities market
• strengthen Hong Kongs position as a major
  international financial centre

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(II) Functions Capacity
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Comparison of AMS/3 and AMS/2 Functionalities
AMS/2
AMS/3
Single Market
Multiple Market
Market Model
Automatching
- Automatching - Single price auction - Allow for
other new trading methods
Trading Method
- Limit order - Enhanced limit order - At
auction order - Others
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Comparison of AMS/3 and AMS/2 Functionalities
AMS/2
AMS/3
- Done by EPs - Investors can initiate through
Internet or phone
Order Modification and Order Status Enquiry
Done by EPs
- Done by EPs - Sent to investors
automatically by email, pager or mobile phone
Done by EPs
Order Confirmation
Straight-through Processing
Trading platform established to set the path for
the future implementation of straight-through
processing
N/A
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Comparison of AMS/3 and AMS/2 System Capacity
(1) Host
Handle 200 transactions per second (2.88 million
orders per day based on 4 hours of trading)
Handle 75 transactions per second
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Comparison of AMS/3 and AMS/2 System Capacity
AMS/3 Capacity
Component
(4) Open Gateway (OG)
Hardware capacity 12 transactions per second
(5) Multi-Workstation System (MWS)
Max. 12 transactions per second and 6
transactions per second if risk management
function is on
(6) Order Throughput in addition to first
terminal
1 second per order
(7) Order Routing System (ORS)
40 transactions per second
8 workstations can be connected to an MWS
server.
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Scalability Paths

• AMS/3 Host
• AMS/3 Host system is designed to be scalable,
  meaning that the system capacity could be
  expanded by adding hardware like CPU, memory,
  disc, etc and the software reconfiguration of
  AMS/3.
• AMS/3 Network
• If market needs warrant, AMS/3 Network expansion
  involves addition of network hardware and
  reconfiguration of routers and Internet Protocol
  addresses for the entire network.

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Scalability Paths

• ORS
• ORS is designed to be scalable to support future
  transaction growth. Its capacity can be further
  expanded by adding ORS server and security
  hardwares.
• OG MWS
• OG vertical scalability is currently limited by
  the security hardware (for message encryption /
  decryption) of 12 orders per second. Upgrade
  direction will either be installing new
  encryption devices or, if technically feasible,
  to adopt software encryption mechanism.

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Throttle Rate

• Throttle rate is the number of orders that can be
  submitted to the Host System from OG within a
  specific period of time.
• Rationales of adopting throttle control
• As a flood control mechanism which is common to
  systems of this type, to ensure fair and orderly
  operation of the market
• To ensure OG-Host traffic flow will not exceed
  the planned capacity of AMS/3
• As a reference of SEHK to plan, measure and
  manage trading capacity and upgrade activities

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Throttle Rate

• The throttle rate under AMS/3 is defined as 1
  second per transaction per trading right. The
  order throughput of AMS/2 is 2.5 seconds per
  terminal. Some Exchange Participants may have
  installed two off-floor trading terminals (second
  and third terminals) per trading right.

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(III) Standards
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Resources Involved In AMS/3 Implementation

• Substantial resources required for
• Project planning and system development
• Training, installation and roll-out activities
  for about 500 broker firms, as well as
  information service providers and software vendors

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Resources Involved In AMS/3 Development

• Project Steering Group formed by senior
  executives of the Exchange from the business and
  IT areas
• Andersen Consulting, the project manager, has
  acted as the System Architect and is responsible
  for User Acceptance Testings
• Compaq supplies and installs host computer system
  and OG
• PCCW-HKT responsible for MWS, ORS and network
  development team
• Involve over 1,000 man months, and 140 external
  consultants at its peak. 50 staff from various
  departments e.g. IT, Trading and Information
  Services

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Standards

• The Exchange is committed to ensuring the highest
  quality and service standards of AMS/3.
• Critical problems identified in each test must be
  solved before moving to the next step.
• The Exchange has appointed two expert consultants
  to conduct separate review on system security and
  overall system readiness for launch in order to
  ensure that proper and the highest testing
  standards have been achieved.

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Before AMS/3 market rehearsals, various testing
activities have been performed to ensure
readiness at individual component, system and
operational levels. These items were covered as
follows

• Functional Test
• Volume Stress Test
• Fail-over and Recovery Test
• Security and Operation Control Test

Production Readiness Test
User Acceptance Test
AMS/3 Day-0 Rehearsal Programme

• Production Environment Shakedown
• Production Fallback (e.g. Fallback to Backup Site
  )
• Connectivity Test
• Network Operations Setup
• Market Contingency Plan Rehearsal (e.g. Fallback
  to AMS/2)

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Production Readiness Test

• Production readiness tests had been conducted in
  the past 10 consecutive weeks.
• 10 pilot MWS brokers, 41 pilot BSS brokers,
  selected terminal brokers and all information
  vendors participated.
• Themes of the tests include production
  environment shakedown, production fallback,
  connectivity, network operations setup,
  fallback to AMS/2, and volume stress, etc.
• Technical issues encountered during the fallback
  test from primary site to backup site. The
  issues had been resolved.

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(IV) Preparation for Rollout
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Preparation for Rollout A series of broker
activities were held to familiarise brokers with
AMS/3
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Preparation for Rollout

• The Exchanges various initiatives to get the
  market prepared for AMS/3 rollout
• Raising public/market awareness
• market consultation before system development
• AMS/3 web corner
• press release and presentation to news media
• AMS/3 newsletter
• other investor education initiatives

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Preparation for Rollout

• Support for Exchange Participants
• seminars
• product brochures
• site visits
• terminal training /computer based training

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Preparation for Rollout

• Support for Information Vendors to facilitate
  their connectivity to AMS/3
• Support for BSS Suppliers
• release technical specifications to support their
  in-house system development
• briefing sessions, including technical briefings
  after production readiness tests to share
  experience for ensuring that their systems are
  capable for handling high throughput
• Help desk to handle telephone and email enquiries
  

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Preparation for Rollout

• Next Step Market Rehearsals
• Four consecutive weeks from 2 September - 23
  September
• Aim to familiarise all Exchange Participants
  (including 10 pilot MWS and 41 pilot BSS) with
  new trading environment
• New functionalities
• Operation of Trading Terminals, MWS and OG
• Volume stress (3 times of historical peak)
• AMS/3-to-AMS/2 fallback

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Details of the Market Rehearsal (MR) Scenarios
and Calendar are as follows
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Day 0 Rehearsal Programme

• General
• AMS/3 terminal operation rehearsal following
  completion of terminal training for 1,800
  traders
• Compulsory participation and reporting of
  rehearsal status by Exchange Participants
• Real-life trading procedure

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Day 0 Rehearsal Programme

• General
• Briefings will be provided to all Exchange
  Participants on Market Rehearsal arrangements
• Rehearsal programme will be closely monitored and
  reviewed by the Exchange and the SFC, and
  Exchange Participants are requested to
  participate in compliance with stated
  requirements and guidelines
• Rehearsal programme consists of Normal Trading,
  Volume Stress, Fallback to AMS/3 backup site,
  and Fallback to AMS/2

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Day 0 Rehearsal Programme

• Normal Trading Rehearsal
• Repeated rehearsals for each session for all
  on-floor and off-floor terminal users
• Script-free, but with guidelines to ensure
  realistic real-life practice (For example
  order quantity NOT greater than 10 board lots,
  and order price should be within /- 32 spreads
  against opening price), and
• Exchange Participants are requested to follow
  the guidelines or else will be suspended from the
  rehearsal
• Include normal administrative activities (For
  example new listings, suspension of trading for
  individual stocks, and trading and issuers news
  announcements)

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Day 0 Rehearsal Programme

• Volume Stress Rehearsal
• Two runs of two 45 minutes sessions of volume
  stress test at 3 times historical peak for
  350,000 orders and 250,000 trades per each 45
  minutes session
• Exchange Participants are required to key in 3
  orders per minute using off-floor terminals, and
  on-floor terminals will be reserved for
  computer-assisted generation of traffic to meet
  the target stress

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Day 0 Rehearsal Programme

• Fallback Rehearsal
• AMS/3 to AMS/3 backup site (normal contingency
  fallback)
• AMS/3 to AMS/2 ("3 to 2" fall back, special
  contingency fallback for the first two weeks)

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AMS/3 Rollout Schedule
3rd Batch Rollout
Pilot Rollout 10 sets of MWS terminals
Pilot BSS Rollout
1st Batch Rollout 50 MWS, 30 BSS
2nd Batch Rollout 50 MWS, 40 BSS
10 MWS
50 MWS
xx MWS
50 MWS
Terminals
3040 BSS
30 BSS
xx BSS
40 BSS
Month 3

Day 0 3 weeks
Month 2
Day 0
Month 1
DAY 0
DAY 0 3 weeks
DAY 0 2 month
DAY 0 3 month

• Terminal Delivery
• MWS Multi- Terminal Mode Delivery plus OG
  Delivery

• Activate 30-40 BSS plus OG Delivery

• Rollout depending on market needs
• Auction Trading
• New Order Types - Enhanced Limit Order

• Rollout depending on market needs
• ORS Internet Delivery
• ORS Mobile Delivery

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AMS/3 Rollout Schedule
Day 0
Day 0
Day 0 3 months
Day 0 3 weeks
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Preparation for Rollout

• Rollout strategy - implementation by phases to
  manage implementation risks and preparation for
  progressive market readiness.
• The Exchange aims to identify any possible market
  and system issues related to the system rollout
  in market rehearsals.
• The Exchange will determine if other readiness
  activities will be required after four weeks of
  market rehearsals.

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On Day 0 (To be decided after satisfactory Market
Rehearsals results)

• AMS/3 will operate in terminal mode.
• Other functions and open accessibility will be
  activated in phases.