AMS/3.

8 System Upgrade

November 2010

Agenda

Overview Functional Changes Technical Changes Rollout Plan

Overview

The presentation material gives an overview of the AMS/3.8 system upgrade, which will: (i) Increase capacity and speed over existing system by about 10-fold to support future market growth and improve service delivery; and (ii) Increase market transparency by doubling the depth of market data from 5 to 10 best price levels

Will also make some housekeeping changes and streamline legacy system functions to improve operation efficiency

Capacity and Latency Improvements

Order Rate Capacity (orders per sec) AMS/3.5 (current) 3,000

Average Latency (network excluded) ~150 ms

Stock Page Update Rate (per sec) 1000

EP Circuit Bandwidth

3M / 4M

AMS/3.8

30,000

9 ms

2000

6M / 7M

An Increase in Market Depth from 5 to 10 Best Price Levels for Better Market Transparency

1000

Current Terminal Display Current Terminal Display

New Layout on AMS/3.8 New Layout on AMS/3.8

AMS/3.8 Functional Changes and Impact on BSS

AMS functional changes Open Message Affected Mandatory change for launch of AMS/3.8 Yes Impact on BSS / EP

Harmonization of two levels of price warning

AMS/3.8 will only retain the first level price warning. This will not affect BSS

Current Practice: Two price warnings with different confirmation procedures when the order price deviates from the securitys nominal price by more than 20 spreads (warning #1) or 30 spreads (warning #2) Simplifying Input Operations by EPs: Confirmation procedures for the two price warnings will be consolidated following that of the current warning #1 Without Compromising Risk Controls: After the consolidation, a price warning will continue to be triggered at the more stringent threshold i.e. when the order price deviates from the securitys nominal price by more than 20 spreads
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AMS/3.8 Functional Changes and Impact on BSS (Continue)

AMS functional changes Open Message Affected Mandatory change for launch of AMS/3.8 Yes Impact on BSS / EP

AMS will not generate trading announcements

2113 O-BTA (Trading Announcement)

BSS will not receive trading announcement messages from AMS/3.8

Generated when the best bid or ask price of a security has been changed and shown on line 22 of the trading screen Originally aimed for terminal users in the Trading Hall but are no longer meaningful as the updates are too fast to be viewed by traders Trading Announcement 7

AMS/3.8 Functional Changes and Impact on BSS (Continue)

AMS functional changes Open Message Affected Mandatory change for launch of AMS/3.8 Yes Impact on BSS / EP

AMS will not provide most active securities ranking information

2104 Most Active Securities Update 9103 Most Active Securities Enquiry 9106 Most Active Securities Response

BSS may refer to number of shares traded and turnover from the securities dynamic update to determine stock activity ranking if such information is required

Such information is also available from HKEx website (e.g. the Investment Service Centre carries even more comprehensive information including top 20 gainers, losers, active stocks or warrants by number of shares traded and turnover)
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AMS/3.8 Functional Changes and Impact on BSS (Continue)

AMS functional changes 4 Remove Trade Type Warning checking on Previous Day transactions Discontinue support for index basket order input Support Cross Trading Device Bulk Order Cancel by Market Open Message Affected Mandatory change for launch of AMS/3.8 Yes Impact on BSS / EP

BSS is no longer required to provide input for the trade type confirmation indicator (Tag ID: 99002) in Previous Day transaction request Index Basket Order request will not be allowed in AMS/3.8 In Cross Trading Device Bulk Order Cancel message, an optional Market Code field will be included to indicate cancellation of orders is by market for orders originated from another broker number belonging to the same firm. No change if the BSS chooses to follow the current practice of deleting cross trading device orders on per stock basis (i.e. the optional Market Code is not supplied in Cross Trading Device Bulk Order Cancel request) 9

1501 BS Index Basket Order Input B592 BS Cross Trading Device Bulk Order Cancel

Yes

No

AMS/3.8 Functional Changes and Impact on BSS (Continue)

AMS functional changes Open Message Affected Mandatory change for launch of AMS/3.8 Yes Impact on BSS / EP

Increase of market depths from 5 to 10

2102 Dynamic stock update 9111 Security Summary Dynamic Enquiry Response -

BSS with dynamic data subscription is required to handle 5 additional order queues in the security dynamic update There is no impact to BSS as the number of price queues to be matched depends on the order price input

Increase of the number of matchable price queues from 5 to 10 for Enhanced Limit Order and Special Limit Order If EP has submitted a request form not to receive dynamic market data for a particular BSS, Security Dynamic Enquiry request submitted by this BSS will be rejected

Yes

9008 Security Summary Dynamic Enquiry 9111 Security Summary Dynamic Enquiry Response

Yes

There is no impact to BSS which does not subscribe real time market data. As such, BSS should not have the need to request for a snapshot of the security dynamic data

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Removal of Certain Information Pages from AMS

AMS/3 Info Page No. Description of information Alternative info sources available (dynamic info on HKEx website is 15minute delayed)

To be removed with the rollout of AMS/3.8 and MDS/3.8 1 790-793 20 Most Active Stocks by Shares / Turnover (Main) 1. HKEx website: a. top 5 by turnover at home page b. top 20 at ISC c. 10 most active at Daily Quotations 1. HKEx website - Trading Arrangements (for non structured products) & Product sections (for structured products) 2. HKExnews website

796-799

Newly Listed / Admitted Stocks (Main (796797) / Nasdaq (798-799)) [static information][non MDF]

3 4 5

5200-5399 8650-8699 8783-8784

Main Board News Alert Messages GEM News Alert Messages GEM Newly Listed Stocks [static information][non MDF]

1. HKExnews website

1.HKEx website-Trading Arrangements 2.New Listings in GEM website 11

AMS/3.8 Technical Changes & Impact on BSS

AMS technical changes Open Message Affected Mandatory change for launch of AMS/3.8 No Impact on BSS / EP

Increase the order sequence number (OSN) of each order from 9 digits to 18 digits to cater for larger order capacity.

Order and trade related messages Examples:G519 Order Input

Notification 9023 Order Modification 4592 Order Cancel/Reduce

EPs can choose to use the existing format (9-digit OSN) for initial rollout of AMS/3.8. However following constraints will be imposed:1. Orders are rejected when the order volume processed by AMS/3.8 exceeds the limit of 9-digit order sequence number 2. Unable to perform Cross Trading Device single order cancel on orders having OSN longer than 9 digits 3. OSN is reset to zero in Cross Trading Device Orders Enquiry response, Cross Trading Device Trades Enquiry response and CTF message if it is longer than 9 digits

If EPs choose to support the new 18-digit OSN, their BSS need to supply a new optional field in message 9009 (BSSession Logon). Example of message 9009 that indicates the support of 18digit order sequence number:000629009BS00010212 :99863:Y<CR><LF> 00000201 <CR><LF>

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AMS/3.8 Technical Changes & Impact on BSS (Continue)

AMS technical changes Open Message Affected Mandatory change for launch of AMS/3.8 Yes Impact on BSS / EP

Message reference number used in transaction requests must be in ascending order.

All update type transaction messages Examples:1500 Order Input 4592 Order Cancel/Reduce 4500 Trade Input

BSS is required to ensure that reference number contained in order and trade transactions are in ascending sequence, but it does not have to be consecutive. Order and trade transactions having a smaller message reference number than the previous transaction are rejected with the following error message:9075 Possible Duplicate BS message received In the case of re-submitting doubtful transactions, they must be sent in the same order as the original submission.

AMS no longer provides the Last Message Reference per Broker Number in message 9113 (BS Supervisor Sign-On Response).

9113 BS Supervisor Sign-On Response

Yes

BSS has to rely on its own record to determine the last message reference number used in the previous logon session so that a larger number can be used for further order and trade input after BSS recovery from an AMS/3 host disconnection or fallback to a backup BSS/OG using the same device ID as the production one Example of message 9113:001039113HT00000000BS0001021200000021 :99677:1<CR><LF> :99128:<CR><LF> :99032:1234<CR><LF> :99674:0<CR><LF> :99127:<CR><LF> 1234<CR><LF>

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AMS/3.8 Technical Changes & Impact on BSS (Continue)

AMS technical changes Open Message Affected Mandatory change for launch of AMS/3.8 Yes Impact on BSS / EP

AMS will not notify the number of orders cancelled by a bulk order cancel request or by a cross trading device bulk order cancel request.

2304 Order Cancelled Number will not be sent by AMS/3.8

For bulk order cancel transaction, the number of orders cancelled can be determined by counting the number of message 6519 (Order Update Notification), which are generated for each order cancellation executed by bulk order cancel request For cross trading device bulk order cancel transaction, EP may have to perform cross trading device orders enquiry to check if orders are cancelled. Example of message 6519 for Bulk Order Cancel:001986519HT00000000BS0001021200000004 :99791:20101112 <CR><LF> :99273:152144 <CR><LF> :0C20:1347 <CR><LF> :99126:K <CR><LF> :99566:6000 <CR><LF> :99569:0 <CR><LF> :99190:C <CR><LF> :99296: <CR><LF> :99295: <CR><LF> :99297: <CR><LF> :1072: <CR><LF> :99263:N <CR><LF> :99646:10002 <CR><LF> 4061 <CR><LF>

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AMS/3.8 Technical Changes & Impact on BSS (Continue)

AMS technical changes Open Message Affected Mandatory change for launch of AMS/3.8 Yes Impact on BSS / EP

No RT (Registered Trader) broker indicator in security dynamic information. Security Dynamic Update can be optionally disseminated to BSS in binary format.

2102 Dynamic stock update 9111 Security Summary Dynamic Enquiry Response

For BSS with a need to differentiate RT orders from normal orders in the broker queue, it may have to refer to the RT broker list in the security static data to identify whether a particular broker number is associated with a RT or not

Replace the current Security Dynamic Update (Message ID: 2102) by the binary message (Message ID: 2112). The new binary message carries the same content as the Open Message but with much shorter length.

No

No change to BSS if EPs choose to receive security dynamic update in Open Message format . If EPs choose to receive security dynamic update in binary format, their BSS need to supply a new optional field in message 9009 (BSSession Logon). Example of message 9009 that indicates to receive security dynamic update in binary format:000629009BS00010212 00000201 <CR><LF> :99862:Y<CR><LF> EPs are reminded to ensure their network equipment (i.e. router and network switch) used between BSS and OG have adequate capacity to sustain the AMS/3.8 traffic.

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Rollout Plan
Relevant AMS/3.8 message specifications have been published to HKEx Website in October 2010. EPs using broker supplied systems (BSS) will have to enhance their systems and upgrade their capacity to deal with the AMS/3.8 changes. HKEx will provide a Simulator Package in February 2011 to facilitate EPs testing of their BSS enhancement on 2000 stock pages update per second and on the AMS/3.8 related functional changes. EPs will be requested to return a feedback form by May 2011on their development progress. HKEx will provide a BSS Certification Test Package in Q2 2011 for EPs to conduct their BSS certification test. The package includes a list of functional test cases that needs to be successfully executed by EPs under AMS/3.8 End-to-End testing environment before market rehearsals. Also included is a stock page update test case using the simulator package to verify the BSS readiness to support 2000 stock page update per second. A series of free AMS/3.8 End-to-End test sessions will be provided in early July 2011. EPs will be requested to return their declaration by the end of August 2011 on their system readiness.
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Rollout Plan (Continue)

EP circuit bandwidth will be upgraded to 6/7M prior to the market rehearsal. The new rental charge will be effective on the rollout date of AMS/3.8. Market rehearsals will be organized in Q3-Q4 2011. AMS/3.8 is scheduled for rollout in December 2011 with a 2-week stabilization period (system fallback in case of unexpected major problem).

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