Whether the London Stock Exchange decides to scrap its core
trading platform or upgrade it will be a lesson to all project
teams when developing core business software to meet current and
future needs.
The stock exchange last week said that
it is considering whether to upgrade or replace Tradelect to
retain competitiveness.
Its decision will be a judgement on a project which took four
years of planning. It has been operational since June 2007 and has
been successful in taking the stock exchange to the next generation
of technology. But it may not be enough to keep it competitive.
A stock exchange spokesman says it is now considering whether to
replace Tradelect or upgrade it to keep pace with changes in the
industry.
"The question is whether we can keep competing with Tradelect,"
he says. "It did the job of keeping us competitive and giving us
next-generation technology, but it is now six years since we
started on the project."
If the system is replaced it will be embarrassing and suggest
that the company did not plan in the right way. However, if can be
upgraded to keep pace with a changing sector it will justify the
£40m project that had four years planning.
During Tradelect's design the IT department planned for
substantial software reuse when developing the platform, which
would enable systems to be adapted rapidly to meet changing
business requirements. The exchange has already benefitted from
this adaptability of Tradelect by integrating all the business of
Milan-based stock exchange Borsa Italiana, which it acquired for
£1.63bn in June 2007.
But is the fierce competition in the sector and rapid technology
development making the London Stock Exchange think twice?
As recently as June the exchange's CIO David Lester talked up
its Tradelect plans. He said the migration of trades from Italy was
almost complete and that "the focus for technology is moving to the
next phase".
He also said Tradelect can now complete a trade in 3.7
milliseconds, and that the IT team will continue to reduce
this.
Chris Skinner, CEO at financial services think-tank the
Financial Services Club, says if Tradelect is dropped it will be
embarrassing for the exchange. "I would be surprised if it ditched
Tradelect because it has spent millions of pounds and a lot of time
on it. It had a long term plan to keep developing it and adding to
it."
When Tradelect was introduced to the live environment two-years
ago it was on the eve of the introduction of pan-European
legislation set to liberalise the trading sector. The Markets in
Financial Instruments Directive (Mifid) allowed more companies to
become trading venues.
PJ Giammarino, CEO at think-tank JWG-IT, says the Tradelect
project was a great success because the trading sector was
unaffected by its introduction, which is vital because the trading
sector operates by the millisecond therefore any downtime is
costly.
But he says the fragmentation caused by Mifid with the
introduction of new trading venues was bound to put massive
pressure on primary exchanges like the London Stock Exchange.
Previously they had little or no competition.
But Giammarino says the exchange would have planned for this. If
it does scrap Tradelect, "It might indicate there is something
fundamentally wrong with the system's architecture."
He says there has been "phenomenal growth" in the number of
messages sent and trades completed since Mifid. "It knew Mifid was
coming but it might have got its volume planning wrong."
Giammarino says the problem experienced by the exchange in
September last year when Tradelect could not complete trades for
about eight hours,
due to a technical glitch, put Tradelect in question. "Clearly
this outage really shook the market's confidence in the viability
of the single primary market."
Bola Rotibi, principal analyst at Macehiter Ward Dutton, says
two years is not a long time for core business software such as
Tradelect to be in operation. She says software should have an
architecture that has changes to the business environment at the
core of its design.
"Businesses sometimes decide to replace software but this should
be done after they have made all the considerations in the first
place and because it is the right thing to do at the time, and not
something you have had to do because you have the wrong
architecture in place."
Whether the London Stock Exchange decides to replace or upgrade
Tradelect will be based on its business objectives. It will serve
as a lesson to software development projects either way.