High Frequency Trading Review


    An Interview with Peter Niklewicz

    By Mike O’Hara, 3rd September 2013

    Earlier this week, Warsaw Stock Exchange announced the launch of a new co-location service for high performance access, to offer its clients low latency access to the Exchange’s UTP trading platform.

    In this interview, Peter Niklewicz, Senior Advisor to the WSE Management Board and the Exchange’s chief representative in the UK, discusses this co-location initiative.

    HFT Review: Peter, welcome to HFT Review. Can you provide a brief introduction to who you are and what you do?

    Peter Niklewicz: I’m acting as the London representative of the Warsaw Stock Exchange, based in London. In terms of background, I’ve spent most of my time in the equity markets most recently at RBS.  I have a number of tasks, from raising our overall profile in Europe’s most important financial centre and also supporting the Warsaw team with its business development plans. Being sensitive to our clients’ wishes is hugely important to us, so the Exchange decided to open a London base in order to build and maintain a strong product and business dialogue with our UK-based clients.

    HFTR: There’s been a growing interest in Warsaw as a trading venue recently. What it is that makes Warsaw Stock Exchange such an attractive proposition?

    PN: It’s the mix of liquidity we offer and the growing diversity of the trading entities that form the domestic and international membership of the Exchange. One thing you have to remember, Warsaw is by far the largest trading venue in Central & Eastern Europe.  We constitute roughly 65% market share of trading in the region’s equities (source: Thomson Reuters), which includes Vienna, Prague, Budapest etc.

    One striking feature of Warsaw Stock Exchange is that we have been and remain an active IPO market.  For example in 2012, Warsaw was Europe’s number one exchange in terms of new IPO issues.

    An example of our financial and economic success has been the recent move to increase the main index from WIG 20 to WIG 30.

    And we are a multi-asset venue, including derivatives (on equities and shortly on interest rates) and fixed income.  Hence we’re definitely not just an equity trading venue and have very diverse offerings for our members.  Furthermore, in 2012, Warsaw Stock Exchange increased its investment of PolPX (Polish Power Exchange) to over 90%.  Development of the power market will become an increasingly important part of WSE’s business in the future.

    HFTR: You recently announced the launch of a new co-location service for high performance access. Who or what is driving the demand for co-location at WSE?

    PN: First of all, following our successful integration of the new UTP trading platform in April this year, we’ve seen increasing interest among latency sensitive customers in trading at the WSE. We therefore decided to expand our technology portfolio to offer services specifically targeting those clients.

    We’re also seeing demand coming from both domestic and foreign investment community representatives who use algorithms for execution of various investment strategies. And we expect that the availability of a co-lo service for customers at the WSE will also boost interest among domestic and regional market players who are not using algorithms for the time being.

    HFTR: What kind of round-trip latency figures can co-location clients expect, and what sort of connectivity is available between this new co-location facility and other major trading venues?

     PN: The round-trip network latency, to and from the UTP trading platform, is 100 microseconds.

    WSE can provide direct connectivity into the co-lo facility over Ethernet 1 Gigabit and 10 Gigabit. And we’re in discussions with various parties – including NYSE Euronext who provided us with the UTP trading platform – about accessing WSE from other venues and accessing other venues from our co-location facility.

    HFTR: Is WSE offering any additional assistance to firms who may wish to co-locate but currently have no physical presence in Warsaw?

    PN: We don’t envisage any specific issues for clients but of course we are ready to help at every step. And although we are initially starting out by offering plain co-location with no added services, we are always responsive to clients’ demands and so over time we plan to expand the range of support for clients.

    HFTR: Can you share any details of who will be in the co-location facility from day one?

    PN: From day one (2nd September) the co-location service is available directly to Exchange Members and Data Vendors, however over time we will broaden the co-lo offer to ISVs (Independent Software Vendors) and other types of clients, dependant upon their demand.

    We can’t disclose names of clients interested in co-lo for obvious reasons, however among them there are well known trading players. Firms wanting to co-locate can speak directly with either the WSE or its Members. The list of Members is easily available on our website (Member Section) and we can also direct them to the right intermediaries.

    HFTR: How much does it all cost?

    PN: Our ultimate goal is to increase liquidity on WSE markets and therefore our approach to co-lo pricing is rather tempting for prospect clients. Our lowest cost option for half a cabinet is a one-off fee of 12,000 PLN followed by 4,000 PLN per month, with each cross-connect between cabinets priced at 1,000 PLN per month (c. £1 : PLN 5). Full details of our prices are publicly available on the WSE website.

    HFTR: What is your opinion and expectation regarding HFT firms?

    PN: We constantly analyse trends on capital markets and we’ve come to the conclusion that it is very important to have balanced order books, to have all types of participants active on our markets: i.e. individual investors and long term institutional investors as well as latency sensitive players. We believe that such a mix is beneficial for all parties. High Frequency Trading is not really present on our market yet, which is why we have decided to encourage such players by offering such a service as co-location.

    HFTR: In conclusion, following the integration of the UTP trading platform and now the launch of co-location, what other technology initiatives does WSE have in the pipeline?

    PN: We will be launching Cancel on Disconnection (CoD) functionality shortly, to ensure all market participants who subscribe to the service will be able to manage their risk more efficiently in case of connectivity problems. CoD is a service that is extremely important for market makers and algorithmic traders, including co-lo users

    Additionally we are working on several business initiatives linked directly to technology changes. The goal for us is to make access to equity, fixed income and derivatives markets run by WSE as easy and cost effective as possible.

    HFTR: Thank you Peter.

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