The Polish Power Exchange (TGE), a prominent commodity exchange in the eastern European nation, is to launch a new trading platform provided by the American stock exchange Nasdaq.
The third-party financial technology (fintech) deal gives extra revenue to Nasdaq for sharing its X-Stream Trading technology and installation expertise, and gives new functionality to TGE.
The deal gives TGE the ability to offer new commodity and derivative instruments later this year when the system goes fully live. It will comply with all relevant European regulation and hopefully attract new market participants.
Nasdaq claims its matching engine, which matches buy and sell instructions, is the most widely-used worldwide. It processes orders at the rate of 100,000 orders per second at TGE at an average latency speed of sub-40 microseconds. Speed is crucial on all exchanges as prices fluctuate so quickly.
The trading platform will be fully implemented by July 2017 when the second phase of the project will launch. This will enable the operation of a cross-border, day-ahead electricity trading market that can cater for interconnection auctions under the European Market Coupling regulatory mechanism. This regulatory initiative is intended to encourage more cross-border electricity trading in a European Union (EU) internal market in a fair manner that sells the electricity and interconnection transmission capacity together.
TGE, which is controlled by the state-run Warsaw Stock Exchange, can operate as an approved coordinating exchange under the new rules and with its attendant new trading system.
The first stage of installation, going live now, provides multi-market modeling support across a range of order and asset types, plus enhanced data processing capabilities, index calculation, risk management, control and supervision functionality. Extra market maker support and execution technology is included to enable users to easily run derivative market strategies.
Nasdaq and TGE have partnered on technology since 2008 but this new project offers improved commodity and derivative instrument trading capabilities.
The U.S. headquartered exchange and its fintech technology provision arm is also a partner to the Warsaw Commodity Clearing House (IRGiT), controlled by TGE, where it has been providing clearing services since June 2016.
Other global exchanges, such as the London Stock Exchange (LSE) Group offer third-party fintech licensing deals for their data and execution trading systems. This supports the expense of developing such trading systems and provides an extra revenue stream separate to the small transaction fee that each exchanges takes. In recent years this traditional revenue has come under pressure from new market operators, necessitating diversification.
Nasdaq’s trading, real-time risk, clearing, central securities depository (CSD) and market surveillance systems can be packaged together or, in some cases, separated out depending on client demand. It has clients in over 100 marketplaces around the world.
Commenting on the deal, Dr Paweł Ostrowski, TGE’s president of the management board, said: “The implementation of a modern comprehensive trading system in cooperation with a proven partner marks a crucial business development step for us and participants of the markets operated by the exchange.”
“The latest technology will allow us to face European regulatory challenges and offer the necessary flexibility in shaping our future offering,” he added, while extolling the enhanced portfolio management options for end users and the buy and sell instruments now available at TGE.