On August 6th, the Shanghai and Shenzhen stock markets were breath taking. While overseas exchanges are going down, China’s A-share market defied the fall with the benchmark Shanghai Composite closing at 4,600 points. Statistics from the China Securities Depository and Clearing show the Shanghai and Shenzhen stock exchanges had 230,603 new accounts on the day, bringing the total to 111,246,200.
The outlook, however, wasn’t always positive. The domestic market started a downward slide in 2001, which spelled years of struggle for securities dealers. But things started to change in April 2006. The arrival of a bull market was a huge relief to dealers, bringing them record-high brokerage incomes. When optimism spread as stockholders began dreaming of big fortunes again, every record-high trading volume is a life-and-death test for securities CIOs.
Shortly after its establishment in the early 1990s, the Chinese stock market entered the electronic age. IT technologies became a critical survival tool for Chinese security dealers. When online trading grew to the dominant form for stock trading, securities dealers needed a stable, safe and fast IT system to attract and maintain stockholders that demanded real-time stock market information and fast trading. “The bull market tests whether security dealers’ back-office trading system is stable and efficient, and whether the front-end trading is smooth,” points out by Ma Guangti, the general engineer at China Minzu Securities Co., Ltd. However, insufficient investment in the area made overall IT infrastructure weak in China, negatively impacting system performance. But the reversal of market fortunes in 2006 increased IT spending and pushed securities dealers to the front of IT competition.
Capacity Expansion
When Ma Guangti joined Minzu Securities in April of 2006, the Chinese stock market was starting to recover from its lengthy recession. His 12 years of work experience in IT services of securities industry gave Ma the professional instinct to place Minzu Securities’ centralized trading system, of the same version, on two servers for data processing. Ma’s decision helped Minzu Securities ease through its first major trial.
“It was just an expedient.” After the capacity expansion, Ma believed that fast growth in trading was coming along with the bull market. So, from the end of December 2006 to January 2007, he updated Minzu Securities’ business system, servers and databases. After the Spring Festival, the Chinese stock market warmed up, and in mid May, the daily trading volume of the Shenzhen and Shanghai stock markets posted a record-high of RMB400 billion (US$53 billion). Minzu Securities passed another crucial test.
With over a year at Minzu Securities, Ma undertook two capacity expansions. IT capacity expansion is still one of his top priorities. “Last year, we could support an RMB200 billion (US$26 billion) trading volume on the Shenzhen and Shanghai stock markets; now we can hold a trading volume of around RMB500 billion (US$66 billion). But what if the trading volume on the two stock markets grows to RMB1 trillion (US$133 billion)?”
Meanwhile, Liao Yabin, Chief Engineer of Guosen Securities Co., Ltd., also feel the technology pressures generated by the blazing-hot stock market. In early May 2006, Guosen Securities had just hammered out a plan for IT infrastructure expansion. “Our system used to work to support an RMB40 billion (US$5 billion) plus trade volume on the Shanghai and Shenzhen stock markets. We were about to expand capacity to make it support an RMB100 billion (US$13 billion) trade volume. Unexpectedly, after May Day, the total trade volume on the two stock markets soared to RMB90 billion (US$12 billion), overtaking their plan. In June 2006, Guosen Securities reworked its IT expansion plan, with an aim to support a trade volume of RMB200 billion (US$26 billion) before the end of 2006. So far, Guosen Securities has completed a couple of IT expansions, capable of supporting a trade volume over RMB500 billion (US$66 billion).
Guosen Securities’ IT system has successfully weathered each surge on the stock market. With its rigid judgment and decision about the IT system, Guosen Securities is well prepared to face potential storms. Liao Yabin has set threshold values for key applications on Guosen Securities’ IT platform in all areas, including database utilization rate, bandwidth utilization rate, and network traffic flow. Once the threshold values are crossed, Guosen Securities will start a new capacity expansion. Guosen Securities’ current technical target is the ability to support a trade volume of RMB800 billion (US$106 billion).
For years, Guotai Junan Securities has maintained a stable position among China’s top three securities companies. Since the arrival of the bull market last year, to ensure smooth trading, it has completed two rounds of IT infrastructure expansions. In the first half of 2007, general engineer of Guotai Junan Securities Zuo Feng divided its 113 business offices into 10 groups, whose servers are maintained by a specially appointed individual. He also had all data copied to a Disaster Recovery Server stored at the Shanghai Security Technology Building, close to the computer rooms of Shanghai Stock Communication Co., Ltd., IT service provider of Shanghai Stock Exchange.
In the first half of 2007, Guotai Junan Securities updated its business system, expanding system capacity, communication lines and memory. The company’s IT system is now capable of supporting online transactions by 300,000 concurrent clients or online checks of stock sales by 600,000 concurrent clients.
During the 2007 Spring Festival, Li Chenhui, managing director of information technology center at Orient Securities Co., Ltd. had the central trading computer room moved to the Shanghai Security Technology Building. “It is well equipped there, including power supply, air-conditioners, UPS and security guards. With infrastructure maintenance outsourced, we can focus on IT applications.”
To ensure stockholders’ transactions were not impacted, Orient Securities moved its computer room during holidays when markets were closed. Li Chenhui also took the opportunity to upgrade a series of IT infrastructure facilities, including the servers. To his delight, shortly after the changes, trade volume on the Shenzhen and Shanghai Stock Markets crossed a milestone RMB200 billion (US$26 billion). “The IT systems of securities companies that weren’t prepared were blown out, while Orient Securities’ IT system load was around 20% of capacity,” says Li.
Li also discloses that in the first half of 2007, Orient Securities invested nearly RMB100 million (US$13 million) in IT technologies, with an IT budget around RMB200 million (US$26 million). From 2006 when the bull market kicked off, Li has been racing against time. “Luckily each time, I’m ahead of the game.” According to insiders, from 2006 up to now, 103 securities companies have expanded their IT infrastructure.
