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FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT OCTOBER 2006 TATA CONSULTING SERVICES S. Ramadorai CEO and Managing Director With decades of experience of providing IT solutions behind us, we specialize in consulting, developing financial systems that are customized and adaptable to changing landscape of securities markets. OUR OFFERINGS Over the last couple of years, the securities markets industry worldwide is undergoing unprecedented changes leading to redefining of business models. Introduction of new products and value added services, regulatory changes, diversification needs, pressures of demutualization, competition from new players are some of the key challenges for the capital market infrastructure institutions of this generation. The exchanges are actively pursuing the path of consolidation within and across the national boundaries through formal mergers as well as cross border alliances. In the coming years, we will see many interconnected, trans-national markets in different regions in addition to a few truly global exchanges. Driven by quantum leaps in technology, the role of technology providers has also evolved from a traditional solution provider & system integrator to providing the value added products and services. Today technology has become the core of the capital markets and the technology vendors are partners in progress for the markets. Extensive experience gained in executing various mission critical solutions for exchanges and clearing and settlement organizations, continuous research and analysis of the best practices in securities industry has helped TCS in assessing the current and future needs of the marketplace. Marketplaces of the future would require flexible, versatile and scalable product based solutions to quickly respond to market requirements and achieve a competitive advantage. TCS CAPITAL MARKET SOLUTIONS TCS solutions in the financial services space addresses the 3 key aspects of the exchange marketplace and the challenges – both business and technological, posed in them. These 3 aspects are- 1. Trading (exchanges) 2. Post-trading (clearing, settlement, depository organizations) 3. Broker-dealer operations (large brokerage houses / market intermediaries) 1. Trading After witnessing the electronification of the traditionally open outcry trading, exchanges are currently have the next challenge of coping with the growing volumes and changes in product mix and trading methodologies. This is evident in the case of emerging economies looking to attract local as well as international trading communities. Exchanges are expected to offer trading platforms for a variety of financial instruments. Regulatory changes affecting the trading business are expected to be implemented harmoniously with minimum impact. Exchange trading systems must be flexible, scalable, reliable and high performance to meet these business and technological challenges. TCS’ trading system product – TradeX offers these things. TradeX is readily available for roll out in the market. TradeX components have been already deployed at different client installations. We present TradeX capabilities using 4 key concepts of trading: 1. ‘What’ - Instruments available for trading 2. ‘Where’ - Trading segments, markets 3. ‘Who’ - Trading participants and user hierarchy 4. ‘How’ - Trading rules ‘What’ TradeX supports trading in equities, equity derivatives, fixed income instruments, commodities, commodity derivatives and also offers a flexible framework to manage these diverse financial instruments. ‘Where’ The configurable market hierarchy set up in TradeX enables introduction of new trading segments, markets and trading sessions. Trading sessions can be run multiple times and can be extended. TradeX offers variety of trading models like order driven matching, true quote driven trading model for market markers, hybrid matching and negotiated trade reporting. TradeX also offers variety in matching algorithms and priority of matching. ‘Who’ TradeX provides for the flexible multi-level user hierarchy wherein user categories and hierarchies can be configured as well as extended based on market needs, regulatory conformance and prevalent business practices in the markets. ‘How’ TradeX works as per the trading parameters set by the Market operations staff which can be changed to quickly adapt to changing business requirements such as changes in circuit filter levels, and changes in trading tick size. TradeX provides for basic risk management features such as limits and warning alerts based on order value, turnover value and exposure value. It also automatically triggers various disciplinary actions in case of violations. Circuit filter freezes can be defined at instrument level for pro-active market monitoring and surveillance. For exchanges running multiple market segments, it is essential to avoid duplication of their infrastructure, hardware, maintenance costs and operations staff and have an integrated view of the market – both from the business and the technology side. TradeX provides traders to have a single trading terminal for trading in all market segments. On the technology side, the acid test of the exchange trading systems is in checking their ability to provide high performance and quick response to transactions. Using TradeX architecture, we have demonstrated high performance requirements such as- • Peak up to 8000 orders/second in single security • Peak of 20000 orders/second • Order response time to be < 1 second for 95% of orders TradeX architecture is layered, componential, platform independent and scalable. It also provides facilities to connect through different channels. 2. Post-Trading Today the exchanges, clearing houses and settlement organizations are witnessing a variety of business models. An exchange would like to provide both trading and clearing services while settlement is provided by another agency. Alternatively clearing and settlement services can be provided by a single organization. In short, post-trading infrastructure needs to be geared up for changes in the combination of its business model in either of the directions. Further to stay competitive and cost-effective, the clearing and settlement (CSD) organizations PAGE 24
FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT OCTOBER 2006 have started offering various value added services such as registrar services, collateral services, securities lending and borrowing and clearing services for OTC Markets. It is becoming imperative for the CSD systems to be flexible to handle combination of settlement models as well as settlement cycles. Integrated platform across a range of securities and market segments provide a unified view of the risk management and cross margining opportunities. STP compliance and real time linkages with trading systems, payment systems have become the business necessities of CSD systems today. CSD systems are also expected to be scalable, reliable and extendible to cater to such evolving business situations. TCS’ Clearing and Settlement product suite – eClearSettle supports these needs. Leading and growing markets in Europe and Asia such as Russia, Dubai, Kuwait, Saudi Arabia, Philippines and India have opted for eClearSettle solution to upgrade their technology infrastructure. eClearSettle offers various components for clearing, settlement, depository, registrar and risk management services to adapt to the business model you have chosen for offering post-trading services. These components can be deployed independently or as an integrated system. It also offers value added services like securities lending and borrowing, collateral management, central counterparty services and services for OTC settlement. eClearSettle provides an integrated platform for global range of financial instruments that includes equity, fixed income and derivative instruments. It also has multi-market capability and supports linkages to multiple exchanges. You can link up the payment systems, external clearing house or depository on realtime mode. It complies with international practices such as G30, IOSCO recommendations and choice of internationally recognized messaging standards such as SWIFT, XML and ISO15022. eClearSettle works on a user friendly browser based interface which allows CSD participants to conveniently access the system anywhere. The reports module powered using Crystal report features, allows you to customize the information and layout of the report. eClearSettle is based on state-of-the-art technology thus protecting you from obsolescence and cost of technology upgradation. Further, the architecture is layered and component based. 3. Broker-Dealer Operations Large brokerage institutions are offering brokerage services in a multi-market, multiinstrument environment. Additionally, deploying effective internal risk management measures as well as providing multiple access channels and compliance with multiple messaging interfaces are the vital business challenges for these firms. This is being addressed by our eIBS suite of products: 1. eIBS Matrix–the brokerage front office product and 2. eIBS Precision–the clearing & settlement back office product. Today many large brokerage houses in India, including the foreign and Indian institutional brokerages catering to wide cross section of clients, are successfully using eIBS for their operations. eIBS has been recently selected for deployment across multiple Asian Markets for a Global Financial Service firm. eIBS Matrix offers trading facility to both offline and online clients. Offline clients can trade through the Trader Work Station (TWS), while the online clients can trade either through highly secure and reliable internet trading platform or can use the call center facility (Operator Work Station). eIBS Matrix also offers offline order placing facility to Internet clients. eIBS Matrix is a single window order routing platform for a multi-market, multi-instrument environment. It also provides for various business functionalities desired in brokerage operations like arbitrage, basket trading, portfolio management, advanced trading strategies, on-line charting and on-line calculators. Besides acting as a back office desk for standard clearing and settlement operations, eIBS Precision offers integrated modules for client servicing which includes collateral management, corporate actions, billing and accounting. It also offers extensive and configurable MIS reporting facilities for regulatory reporting and internal MIS. The eIBS suite of products are compliant with standard messaging and offer the much needed STP capabilities by providing an online interface with the payment systems and CSD organisations. In addition, one can also integrate news, streaming data and important market data into the eIBS Matrix. CONSULTING OFFERINGS The market intermediaries, exchanges, and CSD organizations play a formidable role in shaping up the securities markets policies of the country as well as of the region. While doing so it is becoming imperative to look at the experiences and practices of other markets and adopt the best-in-class models that suit the local needs. Our business consultants can help you in blending the best of both the worlds and arrive at the winning strategy in the areas of exchanges, clearing and settlement organizations, depositories, brokerage firms, mutual funds and others. Our financial services consulting practice is spearheaded by industry specialists having expertise in global capital markets and experience of architecting mission critical solutions for international players. We provide an array of consulting services focused on customers’ business, processes, systems and operations. ABOUT TATA CONSULTANCY SERVICES For over a decade, we have been very closely engaged in the financial markets domain. Besides providing mission-critical and high performance solutions to our global customer base, we have also designed specialized solutions that have transformed the business operations of leading financial powerhouses. Our valued customers include new generation exchanges, CSD organizations, central market surveillance and regulatory bodies, brokerage houses in the both matured markets like North America, Europe, Canada as well as emerging markets like the Middle East, Africa. Established in 1968, TCS, a part of TATA group, is Asia’s largest and one of the world's leading global information technology (IT) services, business process outsourcing and consulting organizations. The pioneer of the flexible global delivery model for IT services, we offer a comprehensive range of technology driven business solutions. For more information, please visit http://www.tcs.com/financialservices CONTACT INFORMATION Contact Name Mr. Jagdish Bhandari E-mail jagdish.bhandari@tcs.com Website www.tcs.com PAGE 25
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