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| Heads of IT and overseas departments of the Korea Exchange (KRX) pose prior to an interview with The Korea Times. From left, Director General of Global Business Jung Kyoo-il, Director General of IT Management Lee Chang-jin, Executive Director and CIO Chung Geun-young, and Director General of IT Strategy Kim Dae-young. / Courtesy of KRX |
IT department buttresses stable run of capital market system
By Anna J. Park
Every day, millions of individual and institutional investors are trading stocks, ETFs, funds and derivative products worth an average of more than 57.3 trillion won ($47.1 billion) on the bourse operated by the Korea Exchange (KRX). While the buying and selling systems offered by investment firms may differ, all of the final trading, clearing and settlement processes are conducted through the KRX platform.
The KRX's current trading system is called "EXTURE Plus," and was launched in 2014. As a comprehensive market, the system allows a wide spectrum of products ― from stocks, bonds, and structured derivative products to actual commodities like gold or petroleum ― to be traded through the state-of-the-art platform.
Given that each moment during the market's open hours involves millions of investors' decisions critical to the betterment of their financial status, it is extremely important to keep the trading platform running stably and safely.
The Korea Times met with those who are in charge of ensuring the smooth operation of the bourse operator's trading system.
In a group interview, four heads of the KRX's IT and overseas departments ― Executive Director and Chief Information Officer (CIO) Chung Geun-young, Director General of IT Management Lee Chang-jin, Director General of IT Strategy Kim Dae-young and Director General of Global Business Jung Kyoo-il ― talked about what it is like to work behind the scenes to keep the country's key financial system reliable and safe for investors.
Complete computerization by 1997
Having spent the last 28 years at the KRX, Executive Director and CIO Chung Geun-young has both closely witnessed and been a part of the bourse operator's computerization achievements. The KRX was first launched back in 1956, and the capital market began open to foreign investors in 1992 ― when Chung first joined the bourse operator, fresh out of college.
"When the KRX was first opened in 1956, all trading, clearing and settlements were done manually. Gradually the parts of the processes became computerized. When I joined the KRX in 1992, some of the processes were already computerized, though a significant portion of the settlement process was done manually," Chung recalled.
"By 1997, every step of the processes had become totally computerized, getting rid of the trading floor, while other major exchanges kept their floors until much later. I have this sense of pride that the KRX was one of the first exchanges in the world to achieve complete computerization," he explained.
Seamless operation
The KRX trading system is noteworthy for its remarkably stable operation. Not a single shutdown or trading halt of a regular market has occurred since 1997, and the chiefs of the IT departments at the KRX have demonstrated a deep responsibility to prevent such disastrous events from happening.
Globally, it's not uncommon to hear news of a major global exchange, such as the New York Stock Exchange or Tokyo Stock Exchange, suffering a temporary suspension to daytime trading due to an unexpected technical issue.
However, the KRX's regular daytime markets ― including KOSPI, KOSDAQ and commodities ― have never had to be suspended.
"We are operating our system very stably at a world-class level, and such stable running of our system proves that ours is as good as other major bourses' platforms," the CIO Chung stressed.
"We are now currently developing a new upgraded system slated to be launched by 2022, and we are hoping to continue this stable operation and management of the trading platform for the next 10 years," he added.
Speed and stability
As noted by CIO Chung, the KRX is set to see a system upgrade in 2022. Its current system, "EXTURE Plus," was launched in 2014, following its previous model "EXTURE," which was released in 2009.
"The competitiveness of a capital market lies in its system. Thus, the strength of a system is tantamount to the market's power," said Director General of IT Strategy, Kim Dae-young.
"As a result, we need to continuously upgrade our system, as any defect that could cause the system to halt would result in enormous aftermath. However, it is a trade-off relationship between maintaining a systemic stability and advancing the system, as the latter bears potential for risk," Kim explained. He added that the IT department of the bourse operator has been making the utmost of efforts into improving the system, despite such risks.
In addition to the KRX system's reliable stability, another pillar of its strength is its speed.
"As seen from the fact that the KRX was one of the world's first exchanges to achieve complete computerization of its trading process, we have been consistently developing our system and infrastructure at a global level, in order to provide all of the necessary services that global investors ask for," Director General of IT Management Lee Chang-jin said.
"For example, the KRX system's latency ― the average time needed to process a buying or selling order ― stands at 70 microseconds. This is a global top-tier level of speed," Lee explained.
Exporting trading systems
Thanks to the system's excellent stability and world-class speed, the KRX is Asia's only stock exchange that has the capacity to export its own capital market infrastructure and technological assets to other countries. The only few other stock exchanges in the world that have this capability are NYSE, Nasdaq and LSE.
So far, the KRX has seen the export of its various IT systems ― including stock trading, clearing & settlement and surveillance systems ― to five countries, including Malaysia, the Philippines, Thailand, Azerbaijan, and Vietnam. The KRX has also set up national trading systems in Cambodia, Laos and Uzbekistan.
The market systems exported by the KRX to Thailand and Azerbaijan in particular have been awarded for their systemic excellence by Futures and Options World (FOW) ― the derivatives arm of Global Investor Group.
"The KRX's ample experience of managing a comprehensive market, consisting of KOSPI, KOSDAQ, derivatives markets, and commodities' trading, has become a big asset for us," Director General of Global Business Jung Kyoo-il explained.
"What we have learned from successfully running the total market could directly help other countries' attempts to set up or upgrade systems in their capital markets," he added.
What makes the technical strength of KRX more competitive is that the national bourse operator closely works with its IT subsidiary Koscom to develop its own system ― unlike other major exchanges which tend to procure technological solutions for their markets from outside sources.
"This is part of the reason why the KRX's exporting system has price competitiveness, in addition to our cost-efficiency in providing maintenance for already-exported systems," Jung explained.
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| KRX has successfully exported its trading IT solutions and systems to various countries in Asia. It is Asia's only stock exchange with the capability to export those systems to other countries. From left, Director General of Global Business Jung Kyoo-il, Director General of IT Strategy Kim Dae-young, Executive Director and CIO Chung Geun-young, and Director General of IT Management Lee Chang-jin. / Courtesy of KRX |
Joining international initiatives
Beyond exporting, the KRX also engages in various international cooperative projects. Annually, it participates in regular events organized by the Asian and Oceanian Stock Exchanges Federation (AOSEF) and the World Federation of Exchanges (WFE), among others.
The world's bourse operators gather every year to share their ideas on how to bring their common agenda to the spotlight and how to increase their shared interests.
This year's AOSEF General Assembly was slated to be held in April in Busan, but was canceled due to concerns over the spread of the coronavirus. Next year's assembly I scheduled to be held in Busan in spring.
"Currently, one of major issues on an international level is ESG (environmental, social and governance)-conscious investment," Director General of Global Business Jung said.
"The Korean government is also making a lot of effort to bring about improvements in this area, and the KRX is also trying to reflect this trend in our information and product systems," he said, adding that the AOSEF meeting in Busan will include a subcommittee on the role of bourse operators regarding ESG-themed investment.
The KRX has also signed MOUs with stock exchanges in over 30 countries. In 2019, it partnered with China's Shenzen Stock Exchange; in 2018, it also signed a trilateral MOU with the Japan Exchange Group and Taiwan Stock Exchange, aiming to strengthen regional cooperation among neighboring countries in Northeast Asia.
The KRX takes part in various other global cooperative projects, mostly led by international development organizations like the Asian Development Bank (ADB), European Bank for Reconstruction and Development (EBRD), and the Inter-American Development Bank (IDB), providing market education, IT solution seminars, and training to officials and institutions in developing countries.
Bracing for the next decade
Executive Director and CIO Chung stressed that KRX has worked to clearly systemize its diverse, global and domestic experience in successful market operation, and said that this can further help other countries in need of building a more stable and reliable capital market.
He also expects the next system upgrade by 2022 to further boost the nation's bourse operator and maintain its competitive advantage.
"Our current efforts to establish the new system aim to maintain an edge over competitors in the global stage for the next 10 years," the CIO said. "I am sure that when we accomplish that goal in 2022, we will continue to lead other international players, remaining steps ahead," he added.
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