Stockmartnet Holdings, a group founded by 10 Hong Kong brokers that counts a further 164 brokers as members, has signed a technology infrastructure and web hosting deal with IBM. The platform will provide subscribers with the necessary resources to offer efficient real time stock trading through a direct connection to the Stock Exchange of Hong Kong.
Through the IBM partnership, Stockmartnet will be able to offer its members and other subscribers network connectivity, hardware, system integration and hosting services, and training for brokers.
Stockmartnet was formed last year with the aim of helping its member brokers move into the electronic age without the prohibitive cost of major infrastructure investments. Through bringing together many smaller firms, Stockmartnet also hopes to help its members move into business areas that previously weren’t possible due to their small size. Underwriting of new share issues or private placements are just some of the areas the group hopes to participate in.
Strength in numbers
The Stock Exchange of Hong Kong categorizes brokers into three levels, each accounting for approximately one third of market share. Category A holds the top 14 brokers, Category B, the next 50, and category C the rest. Members of Stockmartnet account for 14% of Category B brokers and the group’s total membership accounts for 20% of the exchange’s volume.
This makes it easier, not only to break into new business areas, but also to negotiate better deals with hardware and software vendors, says Anthony Espina, managing director of Goldride Holdings - a member of Stockmartnet.
The outsourcing of technology requirements is a growing trend and in the case of smaller brokers there are several models emerging. Some technology companies have set themselves up application service providers (ASP), and offer individual clients (brokers) access to their hardware and software, sometimes with a certain amount of customization. Another model sees brokers banding together and making an equity investment in a separate entity that will take care of their technology needs. This is the basics of Stockmartnet and is also similar to FastHUB in Singapore, for which IBM also provides infrastructure and hosting.
Some vendors of trading systems have formed partnerships with data centres to offer a full outsourcing service to securities houses. For example, Brokat has teamed up with the Business-to-Business Service unit at PCCW’s, and iAsia offers systems hosted by iLink, which recently listed on GEM. SEHK is also promoting its own Order Routing System (ORS) that clients who have installed the exchange’s Multi Work Station (MWS) can use for receiving orders though fixed-line internet or mobile channels.
But the exchange’s system is limited by the number of terminals, or workstations, that it supports. Although most brokers describe the MWS as a good back-up service, it can only really support five or six terminals. While this works well for Hong Kong’s very small brokers, most will need additional resources. Espina says most members of Stockmartnet would be running no less than 15 terminals, and the IBM platform can provide what they need at a reasonable cost. That cost, a monthly subscription fee, will be revealed at a meeting of Stockmartnet members this Friday.
Another advantage is that the service gives the brokers, and their clients over the internet, access to the broker queue. This is an important point, says Espina, if brokers want to capture the growing market of day traders in Hong Kong.
