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


1
Presentation On AMS/3(I) Overview (II)
Functions Capacity (III) Standards(IV)
Preparation for Rollout
2
(I) Overview
3
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.

4
AMS/3 consists of five major components Host,
Trading Terminal, Multi-Workstation System (MWS),
Open Gateway (OG) and Order Routing System (ORS).
5
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

6
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

7
Benefits of AMS/3
  • To Exchange Participants
  • Allow for more efficient risk management through
    electronic investor authentication and built-in
    credit control function

8
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

9
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

10
(II) Functions Capacity
11
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
12
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
13
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
14
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.
15
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.

16
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.

17
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

18
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.

19
(III) Standards
20
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

21
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

22
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.

23
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)

24
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.

25
(IV) Preparation for Rollout
26
Preparation for Rollout A series of broker
activities were held to familiarise brokers with
AMS/3
27
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

28
Preparation for Rollout
  • Support for Exchange Participants
  • seminars
  • product brochures
  • site visits
  • terminal training /computer based training

29
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

30
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

31
Details of the Market Rehearsal (MR) Scenarios
and Calendar are as follows
32
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

33
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

34
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)

35
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

36
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)

37

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

38
AMS/3 Rollout Schedule
Day 0
Day 0
Day 0 3 months
Day 0 3 weeks
39
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.

40
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.
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