How Plus Markets is using sophisticated IT to compete with the London Stock Exchange

Plus Markets has placed IT at the heart of its strategy to compete with the London Stock Exchange's main market for buyers and sellers of shares.

Plus Markets has placed IT at the heart of its strategy to compete with the London Stock Exchange's main market for buyers and sellers of shares.

The share trading exchange replaced its in-house developed trading platform with OMX Technology's X-stream platform in November in readiness for the introduction of the Markets in Financial Instruments Directive (Mifid).

This EU legislation increased competition between trading exchanges by introducing a requirement for investment firms to use multiple trading venues to ensure they achieve the best available deal for investors. Plus Markets received recognised investment exchange status in July, which enabled it to increase the variety of stocks it quotes.

The platform allowed Plus Markets to increase the number of trades it processes each month. Trading volumes rose from 64,911 in October to 397,419 in January after Mifid came into force and the new trading platform came on line. Plus Markets now trades in 7,500 different shares, up from 1,500 before November.

Plus Markets makes its money by selling licences to its data terminal, which allows dealers to link to the exchange. The more trades it can complete the more attractive it becomes to buyers and sellers, and the more brokers will want to connect to it.

Brian Taylor, chief technology officer, said the company's previous in-house developed system, would not have been able to process these volumes. The old system was written in C++ and SQL, used the Windows operating system and ran on Stratus and Intel hardware,

OMX Technology is a trading technology provider that grew out of the Nordic OMX stock exchange. Plus Markets spent £6.7m on upgrading its trading platform to the OMX X-stream software during a six month project. The deal with OMX includes all hardware, software, 24-hour support for three years and upgrades. Plusnet is able to "tweak" the software to meet its needs.

Taylor said the changes brought in by Mifid mean investors will have a choice of trading venues. The venues must ensure they have the technology in place to attract shares and investors, or liquidity as it is known. "Technology is absolutely critical now because liquidity is going to follow reliability. Prior to 2007 technology was the biggest barrier to our growth," said Taylor.

Plus Markets has hosted the trading system on three separate sites to ensure 100% availability. "Before we implemented OMX we had just two sites and a much simpler system that was not fault tolerant."

Plus Markets' biggest cost centre is technology. Taylor said the company needs "to be religious about keeping its costs down" to reduce the cost of each transaction. He said the company has the advantage of being a relatively young company without a multitude of legacy systems.

Plus Market's choice of the packaged trading platform, OMX X-stream, has helped it to keep costs down by reducing the time to set up and test the system. "We are benefiting from 15 other markets using it," said Taylor.

Bob McDowall, analyst at TowerGroup, said Plus Markets could increase trading further if its technology can deal with the volumes. "Provided the engine can cope there is scope for greater volumes. There is a lot of interest in the type of shares Plus Markets makes available," he said.

Read more on IT architecture