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LSE, Borsa Italiana Eye Consolidation Finish Line

LONDON-Officials from Borsa Italiana and its owner, the London Stock Exchange (LSE), expect to complete the integration of the exchanges’ trading activities in the second quarter of this year, DWT has learned.

The final phase of the migration from Borsa Italiana’s Affari trading system to the LSE’s TradElect platform will include the Mercato Obbligazioni e Titoli di Stato (MOT) Italian retail fixed-income market and Securitized Derivatives Exchange (SeDeX), says Robin Paine, CTO of the LSE.The first stage of the integration, which involved Borsa Italiana’s MTA cash equities market, was delayed due to the market volatility and completed in November last year, says Paine. The original completion date was September 2008 (DWT, Oct. 8, 2007).

As part of the integration, other activities are still ongoing, such as the launch of a new combined Web site in the second quarter, according to Paine. The exchanges are also working to consolidate their respective corporate networks and core infrastructures, such as telephony and e-mail systems.

Engine Upgrade

In order to support the second phase of the Affari migration, the LSE plans a mid-year TradElect update that will offer average latency of 3 milliseconds and will be able to handle 20,000 messages per second. The new release, version 5, will support contracts for difference (CFDs), minimum execution order sizes, pegged and hidden limit orders and will offer a FIX 5.0 interface, according to Paine.

The LSE recently selected FIX protocol software vendor Rapid Addition to provide a high performance FIX engine to TradElect (DWT, March 2). “The adoption of a FIX interface will simplify client connectivity and provide benefits to market participants, many of whom connect to multiple liquidity venues,” says Paine.

Exchange officials will integrate the new FIX engine into the LSE’s platform rather than simply translating FIX messages into the LSE’s Stock Exchange Electronic Trading Service (SETS) interface. This will improve on the performance overhead, according Paine, who adds that the exchange is working with an unnamed third-party vendor to implement the new FIX engine. “FIX has been implemented to ensure minimum latency-it has been implemented in such a way that we translate from FIX directly into the internal TradElect protocol,” he adds.

The new FIX engine is set to go live in the U.K. mid-year as a complimentary interface, meaning that LSE members can decide whether to implement it and when to do it, says Paine. Bourse officials will only enable the platform enhancements in the appropriate markets where there might be a benefit for participants and where regulatory rules allow, he says. In Italy, however, the issue is under review, he adds.

Dealing with Technology, March 20, 2009.