The Korea Exchange (KRX), considered the world's second largest derivatives exchange, has completed an upgrade of its trading system that creates an advanced platform for the benefit of investors in the local market. The new system is expected to go live on March 23, but is already available for testing by KRX members.

The upgrade, which involves aligning the trading, settlement and information distribution systems, establishes a more efficient platform for obtaining product information, according to KRX.

The next-generation system includes: the KIND (KRX E-Disclosure) and data warehouse systems, which have both been operating since August 2008; a market surveillance system operating since October 2008; and the trading and settlement systems, which will commence operation in March.

Kim Jeong-woo, CIO of KRX, says the next-generation system maximises efficiency, flexibility and stability of trading.

"With its integrated functionality we are confident the system will prove to be the best, and most modern, of its kind," Kim says. "Within the new system, all functions including order submissions, trading execution, price information delivery and client account management have been integrated and standardised as a single process."

KRX's capacity following the introduction of the new system will increase to 40 million quotes per day, twice the current volume. Trade executions or latency time, once the system comes into effect, will decrease to less than 0.08 seconds or 80 milliseconds per transaction, making the system one of the fastest in the world. Singapore's is still much faster, though, and remains a leader in Asia as the Singapore Exchange is able to provide access to its trading engines in one to 20 milliseconds.

The existing main frame environment has been converted to an open unix environment to maximise operating efficiency. In case of failure, the dual system allows for back-up equipment to automatically convert/restore the system on a real-time basis. To cope with disasters such as fire, flooding, and earthquake, disaster recovery systems have been constructed in Seoul (for systems related to derivatives) and in Busan (for systems related to equities). If one computer centre collapses, the other area's disaster recovery takes over.

The new trading system is also timely because it will allow the KRX to accommodate a wider range of financial products that are expected to follow with the implementation of Korea's new Capital Market Consolidation Act, which became effective yesterday. The Act lifts restrictions that have so far limited Korean financial institutions to a strictly defined range of services. Previously, Korean companies were not allowed to provide multiple products, spanning equities and derivatives trading, asset management and investment banking.