The sun rises on Fidessa as Japan’s Osakan Securities expands prop trading system with SOR

Fidessa group plc (LSE: FDSA) announced today that Okasan Securities has selected Fidessa’s SOR (Smart Order Routing) system to enable PTS (Proprietary Trading System) trading as of early 2015.

Okasan Securities is already a client of Fidessa for both of the company’s agency and proprietary trading platforms. The SOR system will be integrated into their existing trading platforms alongside Fidessa’s algorithmic trading engine.

Since the ease in regulation of the TOB (Take Over Bid) 5% rule in October 2012 for PTSs, the market has seen good growth in PTS trading with a large number of domestic asset management companies (investment trusts and investment advisories) trading PTSs through brokers.

SOR enables agency brokers to trade client orders smartly by automatically comparing price and liquidity between the main Tokyo Stock Exchange (TSE) and alternative venues (PTSs and broker dark pools) to achieve best execution. SOR, along with algorithm trading, is becoming essential for securities firms providing execution services for asset managers in Japan. So far the adoption of SOR has been limited to major foreign and domestic securities firms.

PTSs in Japan (Chi-X Japan and SBI Japannext) have established their presence with price improvements by introducing decimal tick sizes. From early 2014, however, decimal tick sizes have been gradually implemented for the TOPIX 100 universe on the TSE too. This raised some concerns on the relevance of PTSs, however even after the TSE’s introduction of decimal tick sizes for small and mid-cap stocks beyond the TOPIX 100 last July, PTSs are still in existence and actively being used.

Shirou Sato, Senior General Manager, Equities Dept. at Okasan Securities, commented: “In order to strengthen our execution services for our institutional clients, we made the decision to enable PTS trading by implementing SOR through our existing Fidessa system. As a result, we will be able to improve our quality of institutional agency trading business and provide our clients with best execution.”

Ian Chilton, Chief Executive of Fidessa in Japan, added: “We welcome Okasan’s decision to adopt Fidessa’s SOR and are very pleased to contribute to adding value to their agency business workflow with this additional module to their Fidessa trading platform. We are determined to continue to meet the needs of our domestic clients by supporting them with innovative systems and high quality client support, so that Fidessa will continue be seen as the best trading system for Japanese domestic securities firms.”

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