Expanding the frontiers of market infrastructure

Over the years Bourse Consult has built up a reputation for providing high level expertise in some of the more important areas of financial market infrastructure. We are sometimes asked for  examples of specific projects that we have advised on and the sort of bodies we have advised. While client confidentiality does not always allow us to give complete details of the projects we advise on, we thought it would be useful for potential clients if we gave an indication of some of the more recent projects we have been involved with.

An important aspect of our work is to transfer our knowledge of market infrastructures to new and developing markets and help them become competitive internationally. Every market is different, of course, and a key part of the challenge is to find a way of bringing together the particular requirements and practices of the local market with the expectations of international players.

One recent example is the work done for an emerging market exchange. The exchange had a legacy electronic trading system that was expensive to maintain and would not allow the introduction of products the exchange wants to introduce. Bourse Consult worked with the exchange to determine its exact requirements for a new system and developed a comprehensive functional description and Request for Proposal (RFP) document. We also provided the exchange with a short list of suitable vendors for the system and arranged a series of presentations from these vendors.

We have also been working with another frontier market exchange to review its post-trade arrangements. The exchange has a set of risk management measures in place. Although effective, they are not in a form that is internationally recognised and would not support future development of the market. Bourse Consult therefore worked with the exchange to develop a proposal for a central counterparty that fully complies with international standards but also accommodates the specific requirements of the local market. Bourse Consult prepared a detailed description of the CCP model, a preliminary business plan and an RFP document, which has now been sent to prospective vendors.

We provide strategic advice to market infrastructure providers and market participants on the impact of global trends in the financial markets. For example we have just completed a study for the City of London Corporation on the prospects for trading in London of the Chinese currency, renminbi, in the light of the Chinese government’s gradual relaxation of exchange controls and goal of turning renminbi into a major world currency.

Markets require increasingly sophisticated technology for their operation, but keeping up with the rapid change of how technology is used in markets can be daunting (e.g. algorithmic trading, high frequency trading, integration of asset classes, pegged orders, strategy orders with automatic generation of implied orders, etc). Several exchanges have recently engaged Bourse Consult to conduct workshops with exchange management on recent developments in technology and markets, including best international exchange system practice. These workshops have been followed by gap analyses comparing their current market arrangements to best international practice. Based on this, short term plans to improve local market efficiency have been developed and long term plans to prepare the exchange for the future.

In several engagements Bourse Consult has also helped to develop a business supporting IT strategy. Sourcing options have been evaluated (build vs buy, and, if buy, from whom?). In buy scenarios, Bourse Consult has assisted in requirements definition, provider evaluation and hands-on negotiation of license, delivery and support & maintenance agreements. In build scenarios, Bourse Consult has helped write extensive detailed requirements.

Within IT operations, Bourse Consult has conducted reviews to help exchanges improve their operational effectiveness and quality. This has been performed both as a preventative activity and to develop an improvement plan after several operational incidents.

From this short description will be seen the extent to which Bourse Consult is able to leverage its expertise in the strategy, trading, clearing and technology of financial market infrastructure. We are equally able to provide this to entities seeking to expand the frontiers of this infrastructure as we are to established marketplaces.