IT Infrastructure in Securities: Needing Comprehensive Development

Not as popular as Ho Chi Minh City Securities Trading Centre (HOSTC) which opened in July 2000, the Hanoi Securities Trading Centre (HASTC) debuted in July 2005 as a secondary securities trading floor. Unlike HOSTC which was completely assisted by Thailand in IT solutions for transaction activities, the HASTC spent more than two years with its IT partner, FPT, to study, build and complete the first phase of the system. Six months later, 10 securities firms and the HASTC test-ran the system before putting it into operation.

 

The HASTC spent some VND6 billion (US$375,000) to build the IT system and assist securities professionals, including more than VND1 billion for software development. Since it was established later, the HASTC had the opportunity to evaluate and build a system fitting the modern market. Mr Tran Van Dung, Director of HASTC, said the system ran rather smoothly, even when the stock market was booming in both transaction size and volume. He said transactions between HASTC and securities companies are always stable and cleared.

 

Together with the investment of securities trading centres, securities companies also pay much attention to their IT infrastructure systems. For example, key securities firms like SSI, SBSC and VCBS purchased foreign solutions customised to the developing Vietnamese market. Others use FPT solutions or join hands with domestic IT companies to build and develop their own systems. Bien Viet Securities Company (CBV) developed its own solutions by consulting those applied in developed stock markets. Trang An Securities Company spent a huge sum of money to hire Vietnam Securities Software Joint Stock Company to build the BackOffice system.

 

At present, securities trading centres and securities depository centres are managed by the State Securities Commission (SSC). However, because the Vietnamese stock market is in the period of formation, securities trading centres have not reached a consensus in IT infrastructure but have developed independently. These systems have certain differences in technological platforms in which the transaction processes are similar between the centres but the implementation methods are different. According to Mr Do Duc Manh, Director of IT Department of HASTC, there are two reasons for the differences. The first one is the very quick development of the Vietnamese stock market. The second is inconsistency in the solutions of securities trading centres and securities companies.

 

The absence of an intermediary system for securities trading centres and securities custody centres leads to complications for securities companies developing IT infrastructure systems. The problem is securities companies have to invest in a system with a transmission line, server and separate applications, and they have to do the same to connect with HOSTC, which also has an independent system developed by Thai experts in 1980s. Securities companies even have to invest in another system to connect with custody centres. Thus, each securities companies has to look at how HASTC is investing in its system and how HOSTC will change in the future before making decisions related to IT development. Then, securities companies will be able to find suitable solutions.

 

At present, the delivery of transaction orders between securities companies and HASTC is carried out by brokers, staff inputting orders from securities companies to the HASTC system. After having order-matching results, HASTC sends them back to brokers and brokers will send the trading results to their securities companies. In fact, many big trading floors in the world still employ brokers as intermediaries for transaction orders and order-matching results. However, when the market is further developed, many securities companies will become members of HASTC and more brokers will work at HASTC. To optimise the process of order sending and delivery, HASTC is planning to build a system for securities companies to directly connect with HASTC without on-floor brokers. This means securities companies will make remote order inputs via servers managed by HASTC and orders will be inputted to the HASTC system. This will not only save costs and human resources but also minimise errors when inputting orders by telephones and faxes. Mr Manh said HASTC is carrying out this project and expects to put it into operation by the end of this year.

 

This also means securities companies have to customise their systems to match HASTC servers. Suitable IT solutions for securities companies at this time are those satisfying the most requirements of securities companies, and easily expanded and customised, said Mr Nguyen Thai Hung, Technology Director of CBV.

 

Experts said to avoid waste in IT infrastructure investment for securities companies and securities trading centres, it is necessary to have a common system. Then, all transactions of securities companies with securities trading centres and securities depository centres will be carried out via this general system. Many advocate a system managed by the State Securities Commission (SSC). Securities companies will never worry about their systems matching those of securities trading centres and securities custody centres, but they only need to invest in Backoffice solutions to connect smoothly with the intermediary system.