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How computers have changed the way we trade
SUPERCOMPUTERS
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STOCK EXCHANGE
Raise CapitalHelps company
grow
Mobilize Savingsfor Investment
Provides Liquidity
Mutual Organizationsthat serve to facilitatetrading of shares of a
company
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HISTORY
Physical locations wherebuyers meet sellers.
Trading took place ontrading pits
Traders yelled and shoutedprice of stocks
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But its a hardjob!
A lot of room for manual
error
Very tiresome
Added cost for runners
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But the improvement of communications technology made the
need for physical trading floors unnecessary
Now trading is through Electronic Trading
Method of trading electronically.
Trading on Electronic Trading Platform
Virtual platform/computer system where securities or derivativestraded.
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BENEFITS OF AUTOMATED TRADING
Reduced cost of transactions: By automation through STP, there is no need
for a physical intermediary like a trading pit or runners.
Greater Liquidity: People can trade from anywhere, so more buyers and
sellers.
Increased Transparency: Easier to communicate information.
Minimize emotions: keep our emotions in check and preserves discipline.
Diversify: Ability to test different strategies.
Back testing: Uses historical trading data to determine viability of new idea.
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ALGORITHMIC TRADING
Use of electronictrading platform
Orders are placed
according to analgorithm
The algorithm executesa pre-programmed set
of instructions
Used by investmentbanks, institutional
investors
Helps drive largetransactions
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HIGH FREQUENCY TRADING
Another form ofalgorithmic trading
Uses sophisticated
tools and soft wares
Uses complex
algorithms
Rapidly tradeshuge block of
securities
Carried out by
supercomputers
Transactions within
a fraction of asecond
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BENEFITS OF HFT AND ALGORITHMIC TRADING
Provides increased liquidity
Leaves less room for error
Used for any trading strategymarket making, arbitrage, speculation etc
Helps humans to make decisions
Can make decisions itself based on historic and current data
Automatic charting and analysis
Various softwares for technical analysis
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ATS-AUTOMATIC TRADING SYSTEM
Computer trading program thatautomatically submits trades
No need for human intermediary
No scope for manual error
Decisions based on historic data,current data, fundamentals etc
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DHAKA STOCK EXCHANGE
DSE operationfullycomputerized
since 1998
Used
AutomatedSystem for theStock
Exchange of
Thailand
Upgraded to
ARMSAdvanceResilienceMatching
System
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FEATURES OF DSE AUTOMATED TRADING
MECHANISM
AOMAutomated Order Matching
MSA Plus Software
WAN/LAN (introduced in 2000)
Application software - TESAThe introduction of these facilities helped because:
Trading was extended to branch offices outside the DSE premises
Allowed to brokerage houses to use computers to execute trade orders &
allowed investors to trade online
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AOM - AUTOMATED ORDER MATCHING
Within each price group, orders are arranged according to time.
Orders groupedbest price takes precedence
According to price and then time priority
ARMS system queues and arranges the orders
At first, brokerage house electronically submits order to DSE mainframe computer
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MSA PLUS SOFTWARE
Upgradedtrading
software
Bridge toreal time
onlinetrading
Place buy or
sell ordersonline
No need forauthorized
trader as anintermediary
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MSA PLUS SOFTWARE
Order executed
Then to the trading engine
Goes to the trading terminal
Place an order
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BENEFITS OF MSA PLUS SOFTWARE
Ensuretransparency
Increasemanagement
efficiency
Decreaserisk at clients
end
Can viewfinancial
statements
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APPLICATION SOFTWARE - TESA
The application, which runs in DSE for trading, is called TESA (The
Electronic Securities Architecture).
MSA is the "Gateway" between the traders and the Stock Exchange, and
manages all the transactions between the traders and the Trading Engine.
TWS is the Front-end Application closer to investors, where they can submitBuy/Sell orders for their desired securities.
This co-operative mechanism enables very high speed processing which is
essential for today's electronic markets.
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FUNCTIONS OF TESA
Market Information: Supplying all market information needed to formulate the buy
and sell decisions
Order Management: Accept, validate and store orders and quotes from broker
workstations and / or systems.
Order Execution: Automatically executes orders when buy and sell prices match. Trade Reporting: Trade execution reports are provided to each trade participant, to
the settlement system and / or the depository and to the market.
Index Calculation: Calculates and publishes market indices.
Market Access: Provide exchange members with efficient affordable GUI-based tools
for accessing the market.
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BENEFITS OF TESA SOLUTION
Fault Tolerance: With most systems Fault Tolerance is created at the
application level. Fault Tolerance is a fundamental design feature of the HP
NonStop architecture.
Data Integrity: TESA employs standard HP tools to achieve exceptional data
integrity Scalability: The ability of an exchange to accommodate extraordinary
increases in transaction volumes without loss of its Capital investment in
automation. The HP NonStop Server is massively scalable due to Parallel
processors.
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DSE ATS
DSE Automated Trading System (HP NonStop S7806) is running on fault
tolerant, high available, scalable and maintainable Mainframe Server.
DSE has developed Automated Clearing and Settlement System, which is a
Web based integrated software
It preserves all the information for every members of Dhaka Stock ExchangeBroker can access required information.
All disk drives are mirrored so, if any of the disk crashes the exact copy of
the data is available at online.
No single component failure will halt the system.
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Mainframe Server of HP NonStop S7810 Server
HP NonStop S-Series Server is being used in the
world including New York Stock Exchange, BombayStock Exchange, Bursa Malaysia Stock Exchange &
London Stock Exchange
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MARKET INFORMATION
Market Information is a real-time market data system. It collects, manages,
generates and stores information relating to trade instruments and issuing
companies.
Collecting Real-Time Market Information: Bids, offers, last sale etc
Collecting company Information
Generating Market Statistics
Market control workstation: allows exchange officials to control operations of
market
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DSE TRADING SYSTEM COMMUNICATION
ARCHITECTURE
Broker Terminal: Broker terminal is the gateway between the Users (Trader, Dealer,
Investor and iTrader) and the Exchange.
Admin Terminal: Administrative functions within the Broker are carried out from the Admin
Terminal like Client Registration, Trader Control etc
Trader Terminal: Traders are users who trade on behalf of client or investors.
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Dealer Terminal: All Dealer activities are performed here as like Trader
Terminal.
Investor Terminal: Clients/Investors are allowed to place local orders through
Internet (as per Client/Investor registration on Brokerage House). Investor
can view Market information in Investor Terminal. iTrader Terminal: iTrader user manages Investor orders, it is special purpose
terminal to handle only the Investors Orders that are submitted through
Internet.
View Terminal (non trade terminal): View Terminal users can locally login into
MSA Plus application and access the information available locally .
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