Agile trading software critical to London Stock Exchange

The London Stock Exchange's decision to write its own flexible trading software has enabled it to react to changes in the stock trading sector and differentiate...

The London Stock Exchange's decision to write its own flexible trading software has enabled it to react to changes in the stock trading sector and differentiate itself from increasing competition.

The stock exchange launched Tradelect, its core trading platform, a year ago this week (18 June 2007). It was part of a four-year, £40m project to replaced the Sets system developed using Cobol in 1995.

Tradelect reduced the time taken to complete a trade from 140 milliseconds to 10 milliseconds and was able to process 2,500 orders a second rather than 593 under Sets.

The London Stock Exchange identified the need for Tradelect to be written in a modular way that could be rapidly updated as a priority from the word go, said Robin Paine, chief technology officer of the LSE.

Rewriting software to meet changing business needs is expensive and time-consuming, unless it is written with change in mind, he said.

Tradelect's modular design allows the stock exchange to add or remove new business functions easily. It was developed using Microsoft's .net Framework, which uses the C# programming language.

"Investment in [Tradelect] puts us in a good position to be able to compete both in terms of increasing the speed of trades as well as launching new elements of functionality on Tradelect," said Paine.

Tradelect's flexibility will be put to the test over the next year. The company plans to duplicate its entire technology platform to serve the Milan based stock exchange Borsa Italian, which it bought last year for £1.63bn. "We would not have been able to integrate Borsa Italiana without Tradelect," he said.

The LSE has set up a laboratory in Reading with engineers from Microsoft, Accenture, Corvil and Intel working on improving performance. The exchange employs six in-house developers dedicated to monitoring and improving Tradelect's performance.

It has become more important for the LSE to optimise its trading platform this year following the introduction of European legislation to liberalise the stock trading sector. The Markets in Financial Instruments Directive (Mifid) has led to new competition. New trading platforms, such as Turquoise, set up by leading investment banks, are emerging.

Bola Rotibi, principle analyst at Macehiter Ward Dutton, said the exchange has demonstrated the benefits of forward thinking.

"If you write software with agility it is a recognition that you want a change platform," she said. "You cannot introduce software agility as an afterthought."

When the London Stock Exchange made its decision to develop its own trading platform the stock trading sector looked very different.

The last year has seen phenomenal change in the sector the London Stock Exchange operates in but the company's modular approach to software development has allowed it to keep pace.

Tradelect achievements

Daily electronic trading increased 82% in last financial year

Profits grew 52% over past 12 months

Ninety-eight of the 100 busiest days ever since its launch

Nine out of 10 busiest days saw over one million trades made in a day.

Record of 1.42 million trades in one day set on 22 January 2008

Timeline for Tradelect upgrades

18 June 2007: Tradelect launched, reducing the time taken to process trades from 140 milliseconds to 10 milliseconds. Capacity increased from 593 to 2,500 orders a second.

November 2007: Version 2 upgrade. Trading time reduced from 10 milliseconds to about 6 milliseconds. Capacity increased by 70% from 2,500 to 4,200 orders a second. Introduced full suite of Mifid-compliant services.

September 2008: Planned migration of Italian trades to Tradelect platform.

September 2008: Tradelect Version 2 to launch. Plans to double trading capacity to 10,000 continuous messages per second. Aims to cut average time taken to complete a trade by half from 6 milliseconds to 3 milliseconds.

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