Post on 26-Dec-2015
Istanbul Stock Exchange
Trading and Settlement Systems
ISE Trading
• Fully computerized trading system since November 1994.
• Stock trading activities are carried out in two separate sessions, one session in the morning and the other in the afternoon.
• Computerized trading significantly improved the speed of execution and increased the daily trading capacity.
ISE Trading Principles
• Prices are determined on a “multiple price-continuous auction” method, utilizing a system that automatically matches buy and sell orders • on price priority and • time priority basis.
• Blind order system with trading ISE members identified upon matching. All information regarding transparency, except standing order IDs, are displayed in the trading system during the sessions.
Ex-API
• As part of the WAN (Wide Area Network) project, the ISE Stock Market members route their orders directly to the ISE automated trading system through an interface software that has been developed by the ISE, called Ex-API.
Ex- API Messaging
• ISE Ex-API has four main message types
• Request Message• Request Response Message• Request Reject Message• Information Message
Request Message• Sent to host in order to execute transaction in
messages like new order entry, order editing, order splitting
• Starts a new transaction in synchronous channel, so should wait for a response message for this request.
• Transaction is performed after a response message is received
Request Messages:1. New Order Entry2. Order Editing3. Order Splitting4. Order Canceling5. Order State Query
Request Response Message
• Sends the result of a request message to participant’s system while Ex-API PC executing Request message
• Ends a transaction in synchronous channel• Response, which is sent to participant’s system, consists
of error acceptance information,• Response Messages:
1. New Order Entry Response2. Order Editing Response3. Order Splitting Response4. Order Cancel Response5. Order State Query Response
Information Message• Information messages sent by host
1. Order is realized information2. Order is cancelled information (User request)3. Order is cancelled information (Order time
ends, rejected by ghost control)4. General Broadcast message
Reporting
• At the end of each session, transaction books, documents of all orders are sent to participants.
• Journals that are open to access of all investors, are distributed over Internet
Communication Network
• There is a two-sided communication link using TCP/IP between IMKB Ex-API and participants.
• Data transmission between IMKB Ex-API and participant’s system is done by two different communication canals:• Synchroneous Canal
• Provides sending response messages for a sent message in the scope of the same process.
• Asynchroneous Canal• Used for sending messages generated by host in
order to inform about status caused by participants’ messages.
Communication Network
Stock Exchange Market WAN
Participant’s system (2)
Express API PC
(1)(5)
Sync
hron
eous
C
anal
(T
CP
)
(3)
(4)
Synchroneous CanalMessage types sent via synchroneous canal are:
From participant’s system to IMKB Ex-API
From IMKB Ex-API to participant’s system
•New Order Entry•Order Editing•Order Splitting•Order Cancel•Order State Query•Request for sending accumulated messages to participant’s system
•Order Entry Response•Order Editing Response•Order Splitting Response•Order Cancel Response•Order State Query Reponse•Response for request of sending accumulated messages to participant’s system
Asynchroneous Canal
Stock Exchange Market WAN
Express API PC
Sen
kron
Kan
al(T
CP
)
Ase
nkro
n K
anal
(TC
P)
(2)
Participant System (3)
(1)
Asynchroneous Canal
• Order entry message is sent.• Order entry response message, which shows the
acceptance of the order by host system, is received.• After some time, passive order is matched with an active
order and so a contract is formed.• Information about messages and contract is sent as a
realized transaction message by IMKB Ex-API to participant’s system.
Asynchroneous CanalMessage types sent via asynchroneous canal are:
From IMKB Ex-API to participant’s system•Realized transaction message•Request reject message
•According to request for sending accumulated messages to participant’s system:
•Order Entry Response•Order Editing/Splitting Response•Order Cancel Response•Transaction Information•Cancel Information•Request Reject Information
•In response to orders changed / splitted or canceled by another user, messages sent to owner of the order are:
•Order Editing / Splitting Reponse•Order Cancel Response
•General broadcast / multicast messages
Ex-API Communication Infrastructure
Communication Mode Two-sided on TCP / IP infrastructure
Communication Infrastructure
10/100Mbit Ethernet for stock exchange market
Communication Characteristics
•10/100Mbit Ethernet Infrastructure. (Currently 10 Mbit)•Data is sent by method of “unicast” between IMKB Ex-API and participant’s system
Integration to Participant’s System
• The most significant risk for participants• Possibility of interruption in remote access
• Controls implemented against the risk• Backup communication infrastructure is used for communication
between IMKB and participant.• Participants are required to log on TTNET or TURPAK networks
provided by Türk Telekom.• In the case of interruption in both networks, participants will be
able to use terminals in session rooms.
Security• Measures taken for data security and data integrity
• There is a virtual private network (VPN) between IMKB and participants.
• All messages are sent as encrypted.• Software mechanisms are developed in order to recover loss of
messages.
• Disaster recovery and other measures to guarantee continuous production
• There is a back-up of IMKB purchase-sale system in Takasbank.• In the case of interruption in transactions, actions to lead participants
to this back-up system are taken by IMKB.
Costs
• Costs charged by the system to participants:• Membership fee paid for once• Commission from transactions• Fee is charged for usage of some terminals• It is also possible to call for a tender for terminals
Settlement Principles
• Centralized Clearing & Settlement: All ISE traded securities must settle through the Takasbank Settlement Center.
• Netting: Takasbank clears securities transactions by creating binding statements of obligation for securities and funds due, via multilateral netting among the participants. Netting reduces a large number of obligations to a small number of obligations. The aim is to reduce principal risk and minimize the need for members to maintain large balances throughout the settlement process.
• Rolling Settlement: Settlement of an individual transaction takes place a given number of days after the deal has been struck; e.g. T+0 for bonds and bills, T+2 for equities.
Settlement Principles
• DvP: The "Model 3 DvP Settlement Model" is applied by Takasbank where simultaneous net settlement of securities and funds tranfers take place. Net obligations are legally binding but settlement is not guaranteed by Takasbank. Members do not get their receivables unless they fulfill their obligations. In case of partial fulfillment of the obligation, proportional payment/transfer out of the receivable is made to the member.
• Book-Entry:Transfer of cash and delivery of securities to/from settlement, are realized between the Takasbank settlement pool account and members' accounts with the Takasbank system, rather than through physical delivery.
Clearing &Settlement Procedure
• Trading Information: Information on trade contracts is transmitted online to the Takasbank system by theISE, on the date of trade (T).
• Netting: Takasbank creates binding statements of obligation for securities and funds due, via multilateral netting among the participants. On the average, net cash settlement amounts to app. 15% while net securities settlement amounts to app. 30%.
• Reporting to Brokers: These obligations, together with receivables due, are reported to the members electronically via Takasbank's proprietary automation system on T+0 for bonds and bills and on T+1 for equities.
Clearing &Settlement Procedure
• Settlement Date: Members are expected to fulfill securities settlement obligations from their own office terminals, which are on-line connected to Takasbank computer system. Securities obligations are fulfilled in book-entry within Takasbank system, while cash obligations are fulfilled through Central Bank of Turkey EFT system.
• Settlement Deadline: Both for cash and equities settlement deadline is 16:00 on TD + 2.
Failed Transactions• If the obligations are fulfilled after the deadline but within the
working hours of Central Bank’s National Payment System (EFT) on the settlement date, default payment calculations will be calculated on the prevailing market overnight interest rate (highest of the ISE Repo-Reverse Repo Market or the Central Bank of Turkey).
• If the failure still exists on T+3, penalty payment is calculated as a triple of the prevailing market overnight interest rate applied throughout the failure period.
• For fulfillment of obligations after 17:00 hrs on the date of settlement, the ISE extends an inquiry to the member asking the reasons for the failure.
• If the failure still exists on T+3 for equities, Takasbank notifies ISE for buy-in or sell-out, indicating the due obligation (cash or securities) and the detailed list of securities and cash receivables under pledge at Takasbank.
Failed Transactions• The payment and securities obligations arising from the trade
related with the buy-in or sell-out process are settled on the same day (T+1 for bonds and bills, T+3 for equities). If the receivables value under pledge is not sufficient to discharge the obligations as a whole, the member's collateral with the ISE is used to fulfill the rest of the obligation