Information Technology in Stock Exchange

[pic] An assignment on Application of Information Technology in Stock Exchange (Dhaka) Course no: PAD-122 Course title: Computer Application and Information Management Department of Public administration, University of Dhaka Submitted to: Professor Sofiullah Course Lecturer of PAD- 122, Department of public administration University of Dhaka Submitted by: Mehedi Hasan Roll no: 49 1st year, 2nd semester, 4th batch Session: 2009-10 Department of Public administration University of Dhaka Date of submission: 13-10-2010 0 Introduction:

The information network of business relationships is perhaps the central element of the production technology of the 21st-century stock investment. Technology is a stock of specie, which tosses into head-tail outcomes. Thus, when online brokerage accounts were introduced, this new form of investment revolutionized the stock market trading in both dimensions of volume and volatility. Yet, individual in Bangladesh cannot have free access to stock market trading other than by going through the brokerage stations, but substantially lower fees and commissions have opened up increased opportunity for every potential investor.

Now, an individual can browse the Internet and go for the stock market information available on the webpage in order to have an instant informed decision about the investment. The surplus units of the society are not supposed to invest their money. So, they are often ready to supply their money to purchase securities from the capital markets. As a result stock exchange plays a crucial role to mobilize capital or the development of a capital market. 0 Information technology:

Information technology is concerned with improvements in a variety of human and organizational problem-solving endeavors through the design, development, and use of technologically based systems and processes that enhance the efficiency and effectiveness of information in a variety of strategic, tactical, and operational situations. Ideally, this is accomplished through critical attention to the information needs of humans in problem-solving tasks and in the provision of technological aids, including electronic communication and computer-based systems of hardware and software and associated processes.

Information technology complements and enhances traditional engineering through emphasis on the information basis for engineering. 0 Stock Exchange: Stock exchanges are formally organized secondary markets for financial assets that have already been issued in primary capital markets. Stock markets have become the hallmark of successful modern capitalist economies, despite the frequency of volatile price movements that lead to excessive speculation followed by panics and despite repeated scandals.

They play an important role, however, for both the primary capital market and the mobilization of bank credit within any economy, basically by providing liquidity for the initial investors in government or corporate debt or in corporation stock. The daily pricing of all such financial products on a stock exchange also makes them ideal instruments as collateral for loans. In sum, stock exchanges are important complements to the efficient operation of the rest of an economy’s financial sector. 0 Dhaka Stock Exchange in Brief: The history of the DSE is not so long.

This is the prime bourse of Bangladesh. The legacy of it goes back to 28 April 1954. However,      its formal trading began in 1956 as East Pakistan stock exchange Association Ltd. The name of the stock exchange was once again changed to DSE Ltd. in 1964. The service was uninterrupted upend till 1971. The trading was suspended during the liberation war and resumed in 1976 with the change in economic and financial policy of the government. Since then the bourse did not look back and continued its journey contributing to the development activities of the nation.

Nowadays, the DSE is the prime bourse of the country. Application of Information Technology in Dhaka Stock Exchange Globally the developments in information & communication technologies (ICT) have created a new instance in the securities market operations. Stock Exchanges all over the world have realized the potentiality of ICT and inclined to the electronic trading systems. It was understood by DSE that technology would ensure transparency, timeliness and satisfaction in customer service. Considering those DSE introduced Automated Trading System on 10th August 1998.

In other words, the trading floor moved right into the member’s office premises where an investor started to place buy/sell orders. Considering market growth the Automated Trading System was upgraded two times. The recently Upgraded Trading System was started from 21st December, 2008. The evolution of the Internet and other forms of information technology are changing dramatically the way the brokerage industry does business. Interestingly, online technology influenced primarily the banking industry, which enjoyed the lion share of the stake of this windfall.

Lots of studies exemplified this fact. Hutzschenreuter shows how the structure of the bank is changed fundamentally. This development is affected by a variety of trends such as customer loyalty is dropping; banking is becoming a commodity and as a whole technology dominates the business. With these trends, the bank industry is evidencing typical features of the financial sector whose structure is involved in a process of change. In addition, completely new forms of financial services are coming into being. Application of Network: Three DSE branch offices located at Chittagong, Sylhet and Khulna are connected via BTTB’s DDN link. We also used connectivity for redundancy for the DDN link. We have a plan to reach the DSE branches in same way. The entire Member Server Applications are connected with Non Stop HP S-Series Server through either DSE LAN or WAN connectivity. Each member has one or more Trader Work Station. The TWSs are being connected to the Trading Server via respective MSA through LAN and WAN connection.

Now a day’s member can establish a main office or branch offices to their remote location and can trade smoothly by using different media ADSL, Optical fiber and Radio Link from Dhaka and other important cities such as Gazipur, Narayanganj, Comilla, Hobiganj, Chittagong, Sylhet, Khulna, Barisal, Rajshahi, and Bogra at the same time. 0 Application of Hardware: Dhaka stock exchange (DSE) upgraded the Trading System again on 21st December, 2008. The existing HP Non Stop S7806 Server is highly fault tolerant to the fact that no single component failure will halt the system.

Its constituent parts are hot swappable and upward compatible; components can be added or removed while the system is running and any compatible new upgraded will work with the system. DSE Automated Trading System is running on fault tolerant, high available, scalable and maintainable Mainframe Server. Previously DSE established the TANDEM Non-Stop K204 System on September 1998 and on August 2005 it was replaced with highly scaleable HP Non-Stop 7802. 0 Application of Internet:

Wilhelm offers both historical and economic perspective on technological innovations in investment banking along with the discussion of advances of information technology particularly Internet and its impact on financial markets. Colvin unfolds some striking facts of the “Net”-corporate how they hide profits with the accounting math. If new-companies could apply the same common sense to their accounting that old-economy firms do, they would see some surprisingly healthy profits. Fact is many of these companies reporting losses actually make money in lots of cases.

This study, in fact, shows the paramount importance of Internet business (E-commerce) having emphasized the opportunity of profit margin shows the dynamics of diverse rational beliefs is the primary propagation mechanism of volatility in asset market. The model also predicts and explains the presence of stochastic volatility in equilibrium asset prices and returns. Coward puts forward that the growth of online trading has exploded in the past few years with a surge in the number of start-ups. As business has grown online, so have the number of traditional brokers who have jumped on the bandwagon. Application of Software: The application, which runs in DSE for trading, is called TESA (The Electronic Securities Architecture). TESA has two parts: MSA (Member’s Server Application) & TWS (Trader workstation). MSA is the “Gateway” between the traders and the Stock Exchange, which manages all the transactions and database operations between the traders and the Trading Engine. TWS is the Front-end Application closer to investors, where they can submit Buy/Sell orders for their desired securities.

In STSD (Signal trader Single Database) system both MSA & TWS are running on a Windows 2k Professional /XP Professional workstation and for MTSD (Multiple trader Single Database) MSA install in a Windows 2k Server & the TWSs are in different Windows 2k Professional /XP Professional workstation-using members in house LAN. 0 Application of TESA: TESA’s Application Programmatic Interface (API) is the gateway to the TESA system from the outside world. All external devices connect through the API. The API provides the translation between external devices and internal processes.

This means that a new process does not need to be written to support each new device, only the API needs to be modified. TESA software is built for the global securities markets. It uses fault tolerant computers, intelligent workstations and client / server design techniques. This provides co-operative processing, high message integrity, continuous operation and fully automatic recovery. This co-operative mechanism enables very high speed processing which is essential for today’s electronic markets. Data integrity is an integral feature of HP architecture. TESA employs standard HP tools to achieve exceptional data integrity.

TESA generates market indices on a real time basis. It generates other statistical information such as Price. All information supplied by the listed companies is maintained in the TESA database. 0 Market Controlling Process: The Market Control Workstation allows the exchange administrative staff to control the operation of the market. Setting and viewing parameters that control the trading engine validation e. g. tick size, Circuit Breaker, Circuit Filter, Market lot, Price protection Percentage. Allows the dissemination of company announcement data and general market administrative massages.

Opening and closing the market via interactive control or by preset timers. 0 Price Controlling Process: One of the most important tools of the Surveillance is the On-line Real Time Surveillance system with main objectives of detecting potential market abuses at a nascent stage to reduce the ability of the market participants to unduly influence the price and volumes of the scrip traded at the Exchange, improve the risk management system and strengthen the self regulatory mechanism at the Exchange. The system provides facility to access trades and orders of members.

By monitoring price and volume movements (volatility) as well as by detecting potential market abuses at an ascent stage, with a view to minimizing the ability of the market participants to influence the price of the scrip/scrip’s in the absence of any meaningful information. 0 Apply in Market Information: Market Information is a real-time market data system. It collects, manages, generates and stores information relating to trade instruments and issuing companies. Market Information is responsible. Bids, offers, last sale (i. e. most recent trade price and volume), book and other data are gathered via the Trading engine.

It supports TESA’s automated and manual trading modules and can process the trades of external and off-market systems. 0 Data Integrity System: Data integrity is an integral feature of HP architecture. TESA employs standard HP tools to achieve exceptional data integrity. The ability of an exchange to accommodate extraordinary increases in transaction volumes without loss of its Capital investment in automation is very important. The HP Nonstop Server is massively scalable due to Parallel processors. One of the most important automation requirements for any stock exchange system is continuous system availability.

With most systems Fault Tolerance is created at the application level. Fault Tolerance is a fundamental design feature of the HP Nonstop architecture. 0 Trading sessions Perform: During this session the system stops receiving orders. The closing price for a security shall be determined as per the weighted average price of all the trades in the last 30 minutes before the closing session. If there is no trade during the above specified time, the weighted average price of maximum 20 numbers of trades preceding the above 30 minutes shall be taken for determination of closing price.

If there has been no trade in the security during the continuous trading session the opening price of the security shall be treated as the closing price. Pending orders executable at closing price and orders ‘match at closing price’ shall be executed in this session. Al other pending orders shall be carried forward to the Post-closing Session. The opening price of securities is calculated in this session. The calculation is made on the basis of orders entered in the system during the Pre-opening session.

The opening price of securities is established in this session. Where there is no trading of securities, the last closing price of that security shall be its opening price. No entry order shall be allowed or permitted in this session. 0 Conclusion: Intuitively, the result of the study has multiple facets in terms of ultimate effects. By and large, volatility of any phenomenon is bad particularly for the economic business cycle. Volatility of trade volume influences attitude of the investors in negative way that aggravates the aggregate investment levels.

This is undesirable for the stock market capitalization, but somebody could be in highly advantageous situation by reason of good luck if s/he could hunt the pick time chance. If not, it could incur her or him high loss. Thus, informed clients could be in advantageous situation than uninformed investors in averting risk. Overall, volatility is not desirable for any market as a whole. In that sense, the outcome of the paper possesses profound insights that influence the investment and finally the overall GDP of the country as a whole. References: Anon. 2007a. Annual Report 2007, Central Depository Bangladesh Ltd. , Dhaka, Bangladesh. ¦ Anon. 2007b. Profile of Dhaka stock exchange, Document Produced Dhaka stock exchange, Dhaka, Bangladesh. ¦ Anon. 2007c. Monthly Review 2007, Dhaka stock exchanges June: 10. Colvin, G. 2000. ¦ The Net’s Hidden Profits. Fortune Magazine: 104, April. Coward, C. 1997. ¦ Black Enterprise Magazine, 1 October. Frank, H. ; and Althoen, S. C. 1994. Statistics: Concepts and Application. ¦ Cambridge University Press, New York, NY, USA. Hutzschenreuter, T. 2001.

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