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It's OK to say that 2006 witnesses the most intensive business innovation and building of technical system in the Shanghai Stock Exchange (SSE) in history. On December 16, just three days prior to the 16th anniversary of the SSE, all members and relevant units experienced another overall online drilling of the New Generation Trading System under the organization of the SSE. The drilling went smoothly, which guaranteed the official switch and launch of the System in the first quarter next year. It is learned that the System supports almost all trading products and modes. Therefore, its launch will ensure further innovation of the SSE.
As organizers and operators of the capital market, stock exchanges should keep sufficient liquidity by offering abundant products to investors and adopting measures to promote the trading of products. Shouldering such a responsibility, the SSE has been engaging in its mission in the national economic development in the face of an emerging and transitional market since the beginning of this year. It has, in line with the plan, innovated its business and technologies in the principle of advancing from simplicity to complexity and from low risks to high risks according to the development trends on the international capital market.
In the aspect of business innovation, the SSE firstly, taking the base market as the core, constructed a multi-layer market structure and further promoted the concept of blue chip and value investment. In particular, it made great efforts to develop such innovative products as ETF based on SSE 50 and 180 Indices. It also introduced warrants for the equity division reform and corresponding innovative trading mechanism. Secondly, it developed the market of fixed income products with focuses on treasury bonds and corporate bonds, especially the assets securitization products. Thirdly, it propelled the establishment of a mature market-maker system based on the mechanism of primary dealers. Fourthly, in the aspect of enhancing market activity and flexibility, it met different trading needs of market participants by perfecting block trading and intra-day trading and setting up the system of margin trading and securities lending after research. Fifthly, it actively explored the derivative market and considered designing of derivatives based on stocks, indices, index products, interest rates and foreign currencies, in order to offer diversified investment instruments and risk management tools to investors. Sixthly, it fully developed systematic, efficient and flexible non-trading services including information service, sale of financial products and multi-path transaction access.
Without doubts, the reinforcement of product innovation and increasingly abundant innovative products urgently calls for better function of the trading system in supporting the mechanism of diversified trading. Thus, the SSE designed and built the New Generation Trading System based on the present trading system and internationally advanced Xetra system, motivated by existing and potential needs of the market, especially in view of the demand over the trading system arising from product innovation.
As a trading platform mainly built by the SSE to support multi-market, cross-country trading and integration of spots and derivatives, the system accommodates the needs in the fast development and innovation of the Chinese securities market. In particular, the New Generation Trading System boasts configurable trading modes (auction mechanism, quote-driven mechanism, negotiable trading, etc.), multiple order types (limit order, market order, stop order, long time order, etc.) and mature risk control means. The System embodies the new technologies, functions, interfaces and standards in the current world securities circle and the design of its capacity and capability boasts of the most advanced level in the globe. Complex trading mechanisms including multi-market, multi-product, multi-time section and multi-mechanism of trading can be realized and almost all trading on spots and derivatives can be supported. The powerful technologies lay a solid foundation for future innovation in such derivatives as futures and options and in systems such as the practice of diversified trading mechanism.
Moreover, by taking the prevalent practice of global stock exchanges as reference, the System firstly introduced the concept of Participant Business Unit (PBU), which is powerful in such functions as business, management and technologies. For example, exchanges and securities companies can even control the purchase and sale jurisdiction of a certain account through PBU, which greatly improves the risk control ability. It is very worthwhile to mention that the STEP (Securities Trading Exchange Protocol), the open-end agreement used by the System, based on the FIX Protocol?Financial Information Exchange?, is the national standard for financial industry developed and defined according to the needs of China's financial market. This agreement provides easier access for foreign institutions and investors to trading service of the New Generation Trading System. The SSE enjoys the self-owned intellectual property rights for the new system. The completion and practice of the System is believed to provide powerful support for the reform, opening up and innovation of China securities market. All this contributes to better exerting the market functions.
