Behind the scenes at Hong KongÆs latest online broker

2cube draws on its HKT heritage and the security and flexibility of BrokatÆs Twister platform to build its business.
It’s not unusual these days for joint announcements and press releases to come from a software company and a traditional bricks and mortar business. Increasingly software companies are coming out of the shadows and helping promote the business activities of their clients, promoting their own services in the process.

A recent example of this is the relationship between 2cube, an online broking joint venture between Chase JF and PCCW, and Brokat, a German IT company that is rapidly expanding its presence in the Asian financial services industry.

Brokat’s involvement with the 2cube joint venture actually goes back before it was even formed. Before taking on the position as managing director at 2cube, Dr. CL Chan was director of e-commerce at Hong Kong Telecom. Even before outsourcing and Application Service Providers (ASP) became such a hot topic he oversaw the development of a technology platform and services that could be offered to Hong Kong’s many securities houses. “Looking at trends here and overseas, we saw there was a great need in the market for a bureau service for brokers,” he says.

In looking for a central platform to build the project on, Chan says the main criteria was to find a proven solution that can cater for all kinds of channels and handle working for a number of brokers and interface with all their back-ends. Brokat’s Twister platform, says Chan, fit this criteria perfectly.

Twister is based upon an integrated Enterprise Application Server. Whilst acting as the runtime environment for each of the customer applications, it simultaneously supports all the necessary infrastructure services such as naming, logging and load balancing. Around this central server Twister has three kinds of modular components. 

Customer Interaction Services modules deal specifically with the many channels through which someone might access the system, whether it’s a PC, telephone or wireless device. Business Services and Connectors work at the application level, plugging in third party solutions such as CRM solutions or reporting as well as allowing the development of customised applications. Finally, the Enterprise Application Integration Services comprises over 40 industry standard modules for interfacing with various popular back-office systems.

“Another key consideration was the strong security infrastructure in Twister,” says Chan. So when he was asked to head up the online trading venture called 2cube, he decided to become the first customer of that bureau service, which is now operating out of the Business-to-Business Service unit of  PCCW’s Net Enterprises operating sector.  

Shared Services

The bureau service at PCCW is now being used by a number of other brokers, so one might think that any technological superiority claimed by 2cube would also be shared by the other brokers. Although Chan stresses the emphasis 2cube has placed on security and reliability – which comes mainly from the Twister platform – he is also quick to add that 2cube has many other advantages over its competitors.

Chief among these are access to Jardine Fleming research, real-time quotes and charting and a well-designed site, which is also hosted by PCCW. Another competitive advantage that comes from not being a participant of the exchange is that 2cube can offer a lower commission rate than the .25% minimum set by the SFC for exchange members. Currently 2cube offers a .18% commission rate, but Chan says he’s not really interested in getting into a price war with competitors.

Because the company doesn’t have a seat on the exchange all of its settlement is handled by Jardine Fleming (JF) Securities. Orders from the 2cube website are routed throught the Twister platform to the back office system at 2cube, and then from there to the settlement system at JF Securities.

With JF as a member of the pilot group, 2cube has also been in a position to be an early adopter of the stock exchange’s new AMS/3 system, but Chan says they have been prudent with the new system in the past few weeks of operation. “We started to use it from the launch date, but we’re migrating the trades progressively,” he says. “We’ll complete the migration by the end of this year.”

Improvements in speed haven’t been immediately evident, he says, due to low trading volume. 2cube has picked up several thousand customers since its soft launch several months ago, and trading volume in general has been low in Hong Kong of late. “But when volumes pick up it will become an important factor,” says Chan.

New Markets

In Hong Kong’s increasingly competitive market for online brokers, offering more than just the home-town stocks is becoming more important. 2cube will be offering trading in offshore markets sometime next year, but the specifics have not yet been worked out. 

If Brokat is going to handle the IT side of such a move, Director for Greater China Michael Tsang says it is just a matter of plugging in modules to Twister, leveraging Brokat’s experience in many markets across Asia. And plugging in these modules to the bureau service at PCCW won’t necessarily mean that all brokers can access them. 

“Specific applications can be cordoned of for use by particular brokers even though everyone is using the same common Twister platform to push trades through to whatever back-office and settlement systems they use,” he says.