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Anchors Away! How Johannesburg switched to the fast lane and what it means

Published in Automated Trader Magazine Issue 33 Q2 2014

Sophie Lewisohn talks to the local exchange, market participants and other industry players to find out what a new co-location centre means for the South African market. Will it herald an influx of low-latency traders, new strategies and more liquidity? Is this market set to leap ahead in springbok-like fashion?

Johannesburg's high speed traders have a shipping disaster off the coast of Kenya to thank.

In 2012, a captain dropped anchor in a restricted area of ocean near Mombasa and hit a bundle of fibre optic cables connecting Africa to the internet.

It was that unfortunate event, among many others of its kind, which prompted the Johannesburg Stock Exchange to move its trading system back to South Africa.

For the decade until 2012, the JSE's matching engines were located in London. "We were highly dependent on international lines to get order and trade messages from South Africa to London and back again," says Nicola Comninos, senior manager of equity market development at the exchange.

Orders had to make a trip across the ocean, taking 180-odd milliseconds - a serious hold up. Saving time was one reason the exchange moved its trading system from London to Sandton, the business district of Johannesburg, in July 2012.

It was also a cost-cutting exercise. "We're now managing the trading engine with local South African resources paid in rands - which is much more cost effective than hosting a trading system in the UK in pounds," says Comninos. "More importantly still, it dealt with stability issues."

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