Momentum in HFT demands infrastructure assist
A swift acceleration in excessive frequency trading across Asia is driving demand for direct access to data throughout the region’s markets. And where many prime brokers have been once targeted on bringing U.S. markets to Hong Kong’s algorithmic trading neighborhood now, it’s “all about China”.
It’s a dynamic that may see new arbitrage alternatives for traders, with infrastructure required to assist their wants.
In response, ICE has stepped up its funding into North Asia with a multi-million-dollar enlargement to a financial network that connects the world’s largest establishments. The funding in ICE Global Network will add capability for shoppers in Shanghai, Hong Kong and Tokyo as certainly one of Asia’s solely full-service suppliers – from internet hosting and managed companies to connectivity and market information.
“It’s direct market access for high frequency merchants in China,” says Alston Hsu, director of connectivity and feeds for ICE in APAC. “It’s hosting, which is relevant to market makers in Tokyo. And it’s ultra-low latency circuits for the trading neighborhood more broadly.”
ICE Global Network provides purchasers the same expertise that underpins its own operations throughout the globe, including the New York Stock Exchange and ICE Futures. As part of this expansion, customers will have the flexibility to make the most of the ultra-low-latency connectivity built by ICE Global Network between Illinois, Tokyo and Shanghai, and between Shanghai and Hong Kong. These highways will permit clients to quickly move market information and trading indicators throughout boarders or regions.
Magnus Cattan, who heads ICE Data Services in the Asia Pacific, says the extra investment in the area is being pushed by the rapid progress of trading and native markets in locations like Hong Kong, China and Japan.
Part of the growth is due to Hong Kong’s well-established Stock Connect program that has opened trading between Hong Kong and mainland China markets, allowing every to commerce the other’s securities utilizing local brokers and clearing.
The Connect program, together with the newer ETF Connect, has seen extra companies in Hong Kong desirous to trade broader markets throughout China. Yet this is typically accomplished through a third celebration.
Cattan says: “What we’re trying to do, is bring that information immediately from China so you get decrease latency – bringing the home content material from China into Hong Kong”.
But maybe a bigger driver of growth is the fast maturation of Chinese markets.
“Anecdotally, 5 years ago prime brokers were targeted on bringing U.S. markets to the hedge fund and different trading communities in Hong Kong,” says Cattan. “Now, it’s all about China.”
Guangzhou’s Futures Exchange started operations this year and plans to trade commodities like silicon, lithium and rare earths. The Beijing inventory change went reside final 12 months with a goal to serve smaller companies.
“These aren’t simply new contracts coming to market – they are actually new exchanges,” says Cattan.
This is creating opportunities for traders.
“The contracts traded on these exchanges are domestically centered, but they look like different contracts traded in Europe and America.
“This creates trading opportunities between completely different markets.”
Cattan factors to the Shanghai International Energy Exchange’s yuan-denominated crude oil futures that launched in 2018.
“This is a home contract for oil in China – nevertheless it has some similarities to different oil benchmarks.
“When new contracts like this come out it creates arbitrage opportunities for merchants.
“We’ve seen that with different commodity exchanges as well – there’s metals trading in China and most just lately, a switch towards equities given the volatility in the markets.”
Chinese interest in HFT has grown quickly, centered around Shanghai. Cattan describes these traders as a diverse group, together with people arrange as high frequency traders alongside subtle bigger companies.
Elsewhere in the region, Tokyo is growing from a unique stage of maturity.
“Tokyo is targeting the ETF group. There are many ETFs in Japan and Japan Exchange Group is offering incentives to market makers,” says Cattan.
The incentives – alongside the rising investor interest in ETFs – are attracting companies again to Japan.
Cattan notes totally different development drivers across Asia led ICE to construct a comprehensive providing to cater for diverse needs.
Hsu says the investment acknowledges that trading firms face unique challenges in Asia.
For starters, the Hong Kong Exchange’s server co-location service is restricted to half- or full- rack choices, which lifts prices. This means corporations want to search out distributors keen to share hosting. An even greater problem is the truth that companies typically try to avoid establishing in China itself and as an alternative favor to commerce from Hong Kong. This can make direct market access to China tough.
Those firms willing to enter China want assist – partly for language barriers, but additionally for finding a associate with local experience, says Hsu. Chinese companies trading the US and Europe need assistance too, and ICE Global Network connects them to the world’s markets.
Cattan says the growth of ICE Global Network is the single biggest organic investment the company has made in Asia prior to now decade
“Our objective is to be a full-service resolution. Co-location, internet hosting, managed providers, support, historical knowledge, direct market access and ultra-low latency, resilient circuits with a quantity of backups. That’s the sort of investment we’re making.”
ICE Global Network
ICE Global Network (IGN) addresses demand for safe knowledge by connecting monetary and commodity markets to the broadest vary of information sources across the globe. The network was created by the New York Stock Exchange within the wake of the September 11 attacks, amid intense focus on the necessity for knowledge safety.
Today, IGN offers access to 150+ global trading venues through one devoted connection, plus information from over 600 proprietary and different sources. The network supports trading and danger management throughout asset lessons, with connection choices including Fiber Networks, Wireless Networks, Colocation and Hosting. Market members have their connections secured through a non-public community, which reduces vulnerability to internet-based cyberattacks and delivers constant routing, larger availability, and reliable factors of service contact.