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EXTENT-2017: Japan Exchange Group: ‘Grand Design’ for a New Clearing System

EXTENT-2017: Japan Exchange Group: ‘Grand Design’ for a New Clearing System

EXTENT-2017: Software Testing & Trading Technology Trends Conference
29 June, 2017, 10 Paternoster Square, London

Japan Exchange Group: ‘Grand Design’ for a New Clearing System
Peter Babucke, VP, IT Development, Clearing Systems, Japan Exchange Group

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June 30, 2017
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  1. June 29th, 2017
    EXTENT Conference, London
    Peter Babucke, Clearing Systems, JPX
    © Japan Exchange Group, Inc. All rights Reserved.
    Japan Exchange Group:
    ‘Grand Design’ for a new
    Clearing System

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  2. TSE OSE
    IT Planning Dept.
    • Creates system ground design for
    JPX corporate group
    • Sets rules and procedures for
    system quality assurance
    Report Report
    Set the rules and
    monitor compliance
    • Develop and
    maintain TSE
    systems
    JPX
    Cooperation
    Outline the
    strategic direction
    Outline the
    strategic direction
    • Develop and
    maintain OSE
    systems
    • Operate and
    maintain OSE
    systems
    • Responsible for
    service delivery
    Operational
    support
    Technical
    support
    Set the rules and
    monitor compliance
    • Operate and
    maintain TSE
    systems
    • Responsible for
    service delivery
    IT Development Dept. IT Services Dept. IT Services Dept. IT Development Dept.
    Operational
    support
    Technical
    support
    JPX IT Organizational Chart
    © Japan Exchange Group, Inc. All rights Reserved. 2

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  3. JPX IT Systems Setup
    © Japan Exchange Group, Inc. All rights Reserved. 3
    Primary Center
    Secondary Center
    AP

    AP
    2
    arrownet
    Optical ring network
    Trading systems
    Clearing systems
    Other systems
    Trading systems
    Clearing systems
    Other systems
    Tokyo Stock Exchange
    (Kabutocho)
    Dedicated lines,
    VPN, etc.
    Back-up
    offices
    Osaka Exchange
    (Kitahama)
    Users
    (Securities cos.,
    etc.)
    AP
    3

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  4. Overview of JPX Systems 1
    arrowhead
    (cash trading)
    ToSTNeT
    (Off-auction cash
    trading)
    1. Trading System
    • In-house system developed with Japanese system vendor
    • Off-auction: ToSTNeT trading for stocks, domestic convertible bonds, etc.
    J-GATE
    (Futures/options
    trading)
    • NASDAQ Genium Package
    • Futures: Japanese indices, overseas indices, volatility indices, bonds, etc.
    • Options: Equity options, index options, JGB futures options
    OSE
    TSE
    • In-house system developed with Japanese system vendor
    • Stocks (domestic, foreign, preferred, etc.), ETF, REIT,
    convertible bonds, etc.
    2. Market Information System
    Market Info.
    System
    ISC • About 100 indices, statistics
    (Index Statistics Calculation Engine)
    TSE
    • Issues data, price, quote, trading volume, turnover, etc
    © Japan Exchange Group, Inc. All rights Reserved. 4

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  5. Overview of JPX Systems 2
    3. Information Systems
    • TDnet facilitates electronic transmission of timely disclosure information of listed companies
    through the network to media outlets and investors.
    TDnet
    4. Clearing Systems
    Clearing
    Systems
    TSE
    5. Network
    JSCC Clearing System (Cash/Derivatives): In-House (Japanese system vendor)
    • Cutting-edge network infrastructure connecting JPX's trading, information, etc. systems (such
    as arrowhead) with trading participants and users.
    arrownet
    © Japan Exchange Group, Inc. All rights Reserved. 5
    JGB Clearing System: In-House (Japanese system vendor)
    OTC Clearing System: Calypso

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  6. Core System Replacement: Master Plan
    © Japan Exchange Group, Inc. All rights Reserved. 6
    FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020~
    * Details will be subject to future discussions.
    arrowhead
    (Cash)
    Launch
    9.2015
    *
    ISC
    (Index & Statistics
    Calculation)
    Next J-GATE
    (Futures/Options)
    Launch *
    Launch
    2015.9
    7.2016
    (Scheduled) Service launch for TOCOM
    *
    Service
    9.2016
    JSCC
    Clearing
    System
    Upgrade
    10.2015
    Respond to new BOJ net
    Latter half, FY2017(Scheduled)
    Renew Derivatives Clearing Function
    Enhance Risk and Collateral Management Functions
    TBD
    OTC Clearing
    System
    JGB Clearing
    System
    Upgrade
    9.2015
    Cross Margin
    Upgrade
    FY2016
    New Products
    (Scheduled)
    Latter Half, FY2017
    (Scheduled)
    10.2015
    Upgrade
    5.2018
    Shorter Settlement Cycle
    (Scheduled)
    TBD
    Launch
    Trading Systems Clearing Systems
    Launched
    11.2011
    ToSTNeT
    (Off-Auction)
    Next ToSTNeT
    (Off-Auction)
    *
    1.2017
    (Scheduled)
    Launch
    J-GATE
    (Futures/Options)
    Upgrade
    FY2017
    New Products
    (Scheduled)
    “Grand Design”

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  7. Future Vision of the JPX Clearing System
    © Japan Exchange Group, Inc. All rights Reserved. 7
    7
    Clearing Infrastructure
    OTC
    Clearing
    System
    JGB
    Clearing
    System
    Listed
    Clearing
    System
    Member
    Member Member
    Deriv
    Cash
    Listed
    Derivatives
    System
    (Cinnober)
    OTC
    System
    (Calypso)
    Listed Cash
    System
    JGB System
    Risk Management System (Cinnober)
    Collateral Mgmt System (Calypso)
    Clearing Infrastructure
    Listed
    Derivatives
    System
    (Cinnober)
    OTC
    System
    (Calypso)
    Listed Cash
    System
    JGB System
    Risk Management System
    Collateral Management System
    ・Clearing
    ・Risk
    ・Collateral
    ・Reporting
    Phase 2/3 Phase 1
    ・Clearing ・Clearing ・Clearing ・Clearing
    ・Clearing
    ・Risk
    ・Clearing
    ・Reporting
    ・Clearing
    ・Reporting
    ・Clearing
    ・Risk
    ・Collateral
    ・Reporting
    ・Clearing
    ・Risk
    ・Collateral
    ・Reporting
    ・Clearing
    ・Risk
    ・Collateral
    ・Reporting

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  8. Clearing System after Replacement
    © Japan Exchange Group, Inc. All rights Reserved. 8
    Clearing Function
    (Listed Cash /
    Listed Derivatives)
    Fund Settlement /
    Collateral
    Management
    Function
    (Listed Cash /
    Listed Derivatives)
    As Is
    Clearing Function
    (Listed Cash)
    Clearing Function
    (Listed Derivatives)
    Fund Settlement
    Function
    (Listed Derivatives)
    Collateral
    Management Function
    (Listed Cash /
    Listed Derivatives)
    After Change
    Terminal
    Single Sign On
    Log-in
    Terminal
    Direct
    Connection
    System
    Direct
    Connection
    System
    Web GUI
    JSCC Clearing System
    Participant Participant
    FIX Base(*) FpML Base(*)
    Custom
    Specifications
    (*) Global standard specifications will be adopted.
    Can log-in with 1ID
    Custom
    Specifications
    Web GUI
    Fund Settlement
    Function
    (Listed Cash)
    CMF
    (non-Web base)
    CMF
    (non-Web base)

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  9. Agile Testing and Migration (with Cinnober)
    © Japan Exchange Group, Inc. All rights Reserved. 9
    Production environment
    2016.05 2017.07 2018.02
    Current system
    Historical data
    Master data
    Trade data
    [JSCC]
    Account Update
    Master Update
    [Cinnober]
    [JPX]
    Performance Test
    Cinnober Sprint Release (1-15)
    [JPX]
    SP1. . . SP15
    ・・・・・・・
    ・・・・・・
    Testing environment
    Functional Test
    [JPX]
    Program Release
    Parameter
    Program
    Release


    Acceptance Test
    [JPX]
    Failover Test Migration Rehearsal
    Go Live

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  10. Milestones and Test Timeline
    © Japan Exchange Group, Inc. All rights Reserved. 10
    2016 2017 2018
    4-6 7-9 10-12 1-3 4-6 7-9 10-12 1-3 4-6 7-9
    Major JSCC
    Project
    【Milestone】
    【Framework /
    Operation】
    【System】
    ▲ 【JGB OTC】
    JGB T+1
    ▲ Publish Outlines
    ▲ 【Listed Derivatives】
    Next J-GATE Launch
    ▲ Rule Enforcement
    【Listed Derivatives】
    Derivatives Clearing
    Renewal Project
    ▲ Briefing or Posting via Target
    - Clearing Framework Change, Various Notifications,
    Participant Test, Migration to Live Environment
    ▲ Briefing or Posting via Target
    -System Function Change, Connection Specifications, Schedule Update
    Individual Follow-up for Participants (to be continued beyond Launch)
    Discussion on Framework/Practice Accept Various Operational Notifications
    ▲Direct Connection
    Specifications (Draft)
    Accept Various System Notifications
    ▲ Direct Connection
    Specifications (Final)
    Participants Test (Weekday Test Environment)
    Participant Test / Migration Rehearsal (Holiday Test Environment)
    Development Period on Participants’ Side
    ▲ Launch
    Discussion on System Change

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  11. Thank you
    © Japan Exchange Group, Inc. All rights Reserved. 11
    Peter Babucke
    Vice President – IT Development, Clearing Systems
    Tokyo Stock Exchange, Inc.
    Mail: [email protected]
    Phone: +81-50-33-777-666
    2-1 Nihombashi Kabutocho
    103-8220 Tokyo
    Japan

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