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New Zealand Readies Infrastructure for Australian ECN

- Updated June 30, 2010

Bolstering its infrastructure in anticipation of the launch of the AXE electronic communications network (ECN) in Australia, the New Zealand Exchange (NZX) has added hardware from Stratus Technologies and connectivity services from financial extranet operator BT Radianz.

AXE is a joint venture of NZX, which initiated the project in 2006 and owns 50 percent, and investment banks Commonwealth Securities, Goldman Sachs JBWere, Macquarie Securities and Merrill Lynch & Co. It is one of two ECNs that have filed for a license to trade securities listed on the Australian Stock Exchange (ASX)–Liquidnet Asia is the other.

Proposed rules from the Australian Securities and Investment Commission would expose ASX to competition from alternative trading systems, provided that transparency requirements are satisfied. The comment period ends Tuesday.

AXE, which hopes to start trading early this year, will inject needed competition into the Australian market, according to NZX. “The ECN will compete with the ASX in Australia and provide brokers with enhanced capabilities and better pricing,” said Stuart Turner, head of strategy and projects at the New Zealand Exchange.

Turner added that the move into Australia “is good for NZX, as expansion opportunities in New Zealand are limited.”

The exchange announced on Jan. 8 that it has installed six ftServers from Maynard, Mass.-based Stratus to act as gateway servers for AXE’s trade reporting services. According to Stratus, the 2400 model ftServers–or fault tolerant servers–protect critical data and provide zero failover time.

“The fault tolerance for gateway servers means that any communications failure will not impact the link to the brokers,” said Michael Fyson, Stratus’ sales director for Australia and New Zealand. “Similarly, with a fault tolerant server, NZX only needs a single image of the database and does not need to worry about keeping the database consistent across multiple systems.”

“NZX required maximum availability as the new ECN allows for off-market trading, which means extended trading hours,” he added.

Some of the servers are located in Australia, according to Fyson, who noted that ftServers provide “remote management and proactive alerting. Many of the normal system administration activities are automated under the ftServer, allowing the NZX to run a small and effective IT team.”

Stratus also supplied six 4300 model ftServers for the New Zealand Exchange’s equities trading systems, replacing blade servers from London-based technology vendor Computershare.

The exchange started using the servers in July, to support its new Trayport GlobalVision trading platform from London-based Trayport. The software allows for anonymous trading and a closing auction, two features NZX did not have previously.

“The decision to replace the equity trading engine was based on the functionality of the software that we wanted to introduce,” said NZX’s Turner. “We chose Stratus, as the software is built on [Microsoft] Windows Server.”

GlobalVision will also be used for AXE. “The trading platform for the ECN is the same as for the exchange, so we chose the same hardware solution,” Turner adds.

“Trayport GlobalVision software has a proven availability uptime of 99.998 percent,” said Paul Constantinou, sales manager for exchanges at Trayport. “NZX provides a high-availability service and based on our previous experience with Stratus ftServers, we were confident in” recommending them to NZX.

During the seven months that the Stratus servers have been operating, the exchange has seen 100 percent uptime, Turner said.

He added: “Stratus will remain the platform for both the ECN and the exchange in the foreseeable future and we are now investigating if we can move other business units to the Stratus platform as well.”

The exchange’s relationship with Trayport opened the door for the Stratus deal, noted Adam Honore, analyst at Boston-based research firm Aite Group. “We’ve seen channel partnerships paying dividends for vendors who can’t seem to open doors by themselves, particularly in hardware and integration services,” he said.

Honore said that NZX’s decision to overhaul its technology was a result of infrastructure challenges it had been facing. In 2003, for example, the exchange had to shut down trading five times.

A week after NZX announced the implementation of the Stratus servers, London-based BT Global Financial Services said that it would provide AXE, through its shared market infrastructure, with connectivity and hosting services for electronic trading access and low-latency market data distribution.

According to BT, firms will be able to host their trading engines at a BT facility to achieve high execution speeds and avoid the natural latency caused by long-distance trading.

“We are enabling AXE to execute a clear strategy for advanced trading in Australia, whilst enhancing overall access to the region,” Richard Man, head of Asia-Pacific for BT Radianz, said in a statement.

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