VSE plans to start computerized trading early in ’88

Computerized trading is coming to the Vancouver Stock Exchange early this year. The exchange started to investigate automated trading over two years ago to keep pace with rapid changes in the securities industry and meet the challenges of internationalization and computerization.

Simultaneously, the surprising growth in new listings and the number of traders on the floor made it very apparent that the current trading facilities would soon become inadequate. In short, the current systems would not be competitive in the world marketplace. Provisions had to be made and automation of the trading floor appeared to provide some of the solutions.

Representatives of the vse Board and management scrutinized other automated systems in use around the world and contacted many people involved in computerizing all aspects of the securities industry. After a lengthy debate, the decision was made to develop a system “in-house” to satisfy the unique demands of the Vancouver marketplace. The result is a world-class trading system that will improve the credibility, visibility, and capacity of the Vancouver Stock Exchange.

The decision to develop an in- house system did not mean that the vse would undertake a project of this magnitude without help. The first step was to assemble a team within the exchange. A Vancouver Computerized Trading Department (vct) was formed by reorganizing Systems Development Staff and hiring new personnel. In addition, tcam, a consulting firm based in New York with considerable experience in the securities industry, was retained.

Programming was only half the problem, however. The other half was deciding exactly how the system should work. This demanded the participation of people with trading experience and a concept of the type of system required. Extensive discussions were organized with traders and other people involved in the industry and major changes were also debated by the Trading Development Committee. Governors involved

The Board of Governors has been involved from the earliest stages of the project. First it was made aware of the vse’s long- term plans to investigate automation and accordingly, established a vct Committee. Then it approved development of the External Specifications (a detailed description of the operation) of the system. And finally in November, 1986, it approved the system’s programming and installation.

To use the language of the consultants, the system in an “automatic order-match process.” In simpler terms it is easier to understand what the system is not — it’s not a quotations system similar to mars nor is it a personalized system intended to assist registered representatives in managing their accounts. It is a trading system, designed to be placed on a member’s trading desk.

Orders will be forwarded to the trading desk exactly as they are at present. The desk trader will determine if the stock trades on the automated system and, if so, will enter the order into the vct terminal. From then on, all aspects of the trade will be computerized — the computer will post the bid or offer and execute the transaction, with the fill confirmed instantly at the trader’s terminal.

Approximately 25 stocks will be trading exclusively on vct when it begins operation. But more issues will be added as the vse and members are comfortable operating the system. If all goes according to plan, the securities currently listed on the development board (approximately 1,300) will be phased into the system over a 9-15 month period. Taking into account the current growth in new listings, there will be approximately 1,300 securities still trading on the boards.

There are four parts to the vct: the mainframe computer at the vse, vct control, Market surveillance, and the Trader Workstation. The processing heart of the system consists of two ibm System 88 computers located at the exchange. These computers will maintain all basic trading information and process trades. Fault tolerant

The ibm S88s are fault tolerant so that if one section of the computer fails, processing is automatically switched to another section. The communication links are duplicated so that the over-all design virtually eliminates the possibility of a system shutdown caused by a failure of the ibm computer. External quotation vendors and all other vse systems such as mars, isis,, and cns interface directly with vct. In these areas, users will notice very few changes.

vct Control will manage the trading operation of the system. In effect, the component will act as a “Floor Governor.” As with the vse Floor management today, vct Control will have two major functions: to manage trading, including trading disputes, trade cancellations, financings, and rulings; and to serve as the trader’s first contact within the exchange for any problems or questions.

Direct telephone help lines will be set up to solve any problems a trader may have with the operation of the terminal. This information will be kept and utilized to improve the system and the training program. Training of traders and administration of qualifying examinations will be designed and taught by vct control staff.

The most important component of vct is the traders work station. Each member firm will have at least one such station installed on their trading desk before the system goes live in February, 1988. The work station is a “smart” terminal consisting of an ibm Personal System 2, a color monitor, a customized keyboard, and a printer. A smart terminal gives its user maximum flexibility in formatting and gathering information and permits as much processing as possible to be done at the workstation.

An extensive training program on the trader’s work station is now being developed by the exchange. Its objective is to familiarize traders with the operation of the system, its features, and the theory behind how the system works. Through a mixture of classroom instruction and one-line simulated trading, traders will learn how the order-match process works in different sets of circumstances, and the priorities assigned to each order. Only qualified personnel

For the efficient operation of the system, and to reduce the occurrence of costly errors, it is essential that every person who operates a work station be qualified. Traders, as they must now on the floor, will be required to pass a vct examination.

vct keyboards with customized keycaps have been assembled by the vse. Without giving too much detail, the keyboard is divided by function. All order entry keys are grouped across the top of the keyboard in dark blue. These are all the keys needed to enter any type of order, to change an order, or to cancel an order. The only two keys that are coloured differently are the Buy and Sell keys. Obviously, these will be needed frequently and the distinction between them is important, so they are different colours.

The morning “opening” is one of the most confusing aspects of vct. The opening refers to the short period after 6:30 a.m. when vct switches from the “pre-opening” (when the orders can be entered and no trades are taking place) to when all the stocks begin regular trading. The basic principle is to open a stock where the maximum volume of shares will trade at one price, something that sounds simple but in actual process is not.