Business

New trading system fiasco at PSX

Existing mechanism poses risks to the integrity, reliability of the financial market

Faraz Ahmed November 08, 2021

Trading commenced at the intra-day low of 53,720.45 points, following a bearish close in the previous session. PHOTO: FILE

KARACHI:

The recent vacillation at the Pakistan Stock Exchange following the hastened launch and the eventual withdrawal of the long-awaited trading system created a huge buzz on both mainstream and social media globally. The existing Karachi Automated Trading System, or simply known as KATS, has long been declared outdated and reportedly contains many loopholes and security lacunas that pose a serious risk to the integrity and reliability of the financial market of the country. The widespread rumours about the data leaks and lack of stringent surveillance capability are some serious issues that cannot be ignored for long.

It was not just introduction of a new system with unresolved issues but also the timing of the launch which created a negative vibe in the market. The timing coincided with the rollover week and also placed a dampener on the anticipated bull run following the successful trip of Prime Minister Imran Khan to Saudi Arabia and a political settlement between the government and the Tehreek-e-Labbaik Pakistan (TLP). Although PSX CEO has stated that the new system was launched in close coordination with all the stakeholders including brokers however, AKD Securities Head of Online Trading Haris Aslam was surprised that despite constant reports of unresolved issues, the system was launched without proper backup plan. He believes that the new system is capable of delivering but at the same time, he suggested forming a steering committee comprising IT experts and brokers to sort out all the issues on a priority basis before the system’s re-launch.

According to the official statement by the PSX, the main issues were related to the locally developed front-end interface Jade Trading Terminal (JTT) and the main trading platform from Shenzhen Stock Exchange met all the expectations. The SCS Head of Strategy Faisal Shaji strongly suggested the PSX management to engage with the best local vendor to create a seamless interface for the new trading system to ensure its optimum utilisation instead of creating a bottleneck.

The existing KATS system is as old as many young traders flocking to the market these days thanks to the growing number of self-proclaimed market gurus on social media and Whatsapp groups. As most of these young traders are tech-savvy, they occasionally complain about the existing system which lacks many features that are considered essential such as the ability to put a trailing stop loss. Also, the lack of features coupled with constant issues on both mobile and desktop trading apps makes them wonder what age they are living in, especially when they look around in other emerging or even frontier markets.

According to a recent report from the National Clearing Company of Pakistan Limited (NCCPL), the active registered unique identification numbers (UINs) stood at 264,525 till October 2021. Around 30,000 new UINs have been added since February this year and many of them belong to overseas Pakistani investors who opened their accounts through the Roshan Digital Account (RDA) initiative. While these overseas investors may be new to the Pakistani stock market, many of them possess ample exposure in the international markets and they are fully aware of the international best practices.

These overseas Pakistan have excess liquidity which can easily fill the void created by the constant exodus of foreign investors from our markets. If the PSX management wants to keep them engaged and increase their participation further, it has to provide these well-versed investors the infrastructure and resources to at least match if not exceed the global benchmarks.

The writer is a financial market enthusiast and is attached to Pakistan’s stocks, commodities and emerging technology

Published in The Express Tribune, November 8^th, 2021.

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COMMENTS (1)

Anonymous | 3 years ago | Reply I feel the writer of this article has not sufficient knowledge about KATS. First of all I would like to state that the current trading System KATS was developed as per the need and requirements of Stock Market. As market need arises and new technologies are also introduced in market this system was updated and also handle market requirements and new features as per need like addition of markets. Current system is using state of art technology and about 90 of system is rewritten in 64bit technology for optimal utilization of Hardware and network resources available. Closing Price Determination process takes time. Have you ever noticed the open price determination time Open prices are determined within few seconds and also the same is broadcasted among all market participants and attached systems. If the current methodology used for closing price calculations revisited time can be saved. Information Leakage no concreate evidence available on this topic. KATS uses the best encryption methods available in market to avoid any information theft or leakage. Every trading terminal connected to KATS Servers uses encryption. If a hacker tries to capture the packets travelling over network may not understand the data or information without having the appropriate key to decrypt the data. Every session in system KATS has a unique key for this process and which is also private one session key will not be useful for other sessions. Robust Pre-Trade System after year 2005 issues Exchange with the consent of higher authorities introduced a Pre-Trade Risk Management System PTEMS. This system prevents exposure and NCB breaches and over the passage of time many yardsticks were also added to avoid any sort of breach possible in the system. This Pre-Trade System was introduced to keep the performance counters of existing system only slight change in order processing time added which is negligible in milli seconds. This system is extremely flexible and capable to handle extreme loads. Many mock session results may be obtained from PSX IT. If the system performance compromised over load you just need to plugin new Hardware and distribute load evenly on these machines. Same provision is also available in case for Failover. N 1 failover is provisioned in the KATS. You just need to add hardware and get the benefit of 1 failover. Whenever a system is replaced with new system the new system at least provides all functionalities available in old system with additional features but in this case in new system number of functionalities are compromised currently exists in old system. There are many more features and functionalities available in the KATS. Writer should know before criticizing the Existing Trading System KATS.

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