JSE’S ITAC: Effectively Navigating A Data And System Migration

5/3/2019 - Monocle Research Team

Integrated Trading and Clearing

In may 2014, the JSE initiated ITAC, a multi-year programme aimed at implementing a new integrated trading and clearing solution. The programme’s objectives are to migrate, using a phased approach, both derivative and bond markets to the millenniumit trading platform, as well as migrating all markets (i.e. Equity, derivatives and bonds) to the cinnober real-time clearing (RTC) platform. Currently, the phases are broken down as follows:

Integrated trading and clearing

 Phase 1 is scheduled to be completed on the 26th of April 2019, with timelines for subsequent phases still to be communicated by the JSE. Depending on the lessons learned during phase 1, the JSE could potentially amend the products and timelines associated with subsequent phases.

 From a trading and clearing member (TCM) perspective, the most significant change that ITAC introduces relates to the decommissioning of the nutron system and the fact that the JSE will no longer be providing a front-end system functionality under millenniumit. TCMs are thus required to source their own JSE-endorsed, independent software vendor solution to conform to the JSE’s new platform requirements.

 TCMs have, over time, found themselves with a multitude of systems that constitute their trading and clearing landscape. This is primarily due to the limitations of individual systems being supplemented by the functionality of other systems – for example, a system’s inability to trade certain products or not having the required risk management functionality. Consequently, the trading and clearing function is inherently disparate and characterised by complex data flows and processes.

 As a result, ITAC poses a significant challenge for TCMs, who need to align their current systems landscape, from an upstream and downstream perspective, to the requirements of a new front-end, as well as the JSE’s new trading and clearing platforms.

 The complexities surrounding ITAC are further exacerbated by the fact that the JSE’s new systems result in new instrument codes, and since these codes are the most common and unique foreign identifiers used in a TCMs downstream systems, significant levels of investigation, identification and changes will be required throughout a TCM’s entire trade life-cycle to ensure a successful migration.

 In our experience assisting with system migrations, we have observed that many organisations tend to underestimate the size of the requirements for a successful migration. They often fail to properly assess their environment and are thus unable to identify all the systems, processes and people that will be affected by the migration, resulting in a significant misalignment. The same holds true for the system migration required to align a TCM’s landscape with the JSE’s new platforms.

 Migrating to a new front-end is, however, not the only concern for TCMs. Let’s consider the pre-ITAC landscape (the solid red line process in the figure below), where a TCM’s front office would connect to the JSE via the nutron front-end system, a trade would be booked and the JSE would match the trade with a counterparty. Once the trade has been matched, the applicable trade data would be provided by the JSE to the TCM’s trading adaptors which, in turn, provide the data to the relevant front, middle and back office systems.  

Front, middle and back office systems.

Now consider the new landscape (the dashed green line process in the figure above) where, not only has the nutron front-end been replaced by an independent vendor solution, but the development of new trading adaptors is also required to align to the data requirements of the JSE’s new platforms. In addition, the new systems bring with them new instrument codes that need to be integrated throughout the entire trade life-cycle.

Therefore, even though the trading and clearing process for TCMs will remain “as-is” from a system, process and people perspective, the front-end replacement, the requirement to redevelop the trading adaptors and the new instrument codes will result in significant work in terms of aligning a TCM’s trading and clearing landscape with the system and data requirements of the JSE’s new platforms.

A Data Migration Roadmap

Monocle has been assisting TCMs with the first phase of their ITAC journey and during this time, we have noted that due to the complexity of their trading and clearing landscape, as well as the intricacies of the ITAC initiative, TCMs tend to materially underestimate the extent of the exercise. This problem is further exacerbated by the absence of a well-designed data migration roadmap and disparate project delivery, which leads to last-minute compression risk and results in the implementation of suboptimal tactical workarounds that are not sustainable in the long-run.

 As with any project, the success of a TCM’s ITAC migration efforts will depend on a robust roadmap to address the JSE’s transformational intent. Having observed the activities within the market, we believe that the following stages are key to developing an effective roadmap for any phase of the ITAC programme.

Evaluation Stage

A.            The objective of this stage is to thoroughly assess the trading and clearing landscape, thereby identifying all the affected systems, processes and people. This stage is also important in understanding the efforts required for a successful migration. The following tasks are essential to this stage: 

i.           Systems, processes and people assessment;

ii.          Data requirements definition;

iii.         Data gap analysis;

iv.         Cost and benefit analysis;

v.          Project scoping; and

vi.         Business case development.

Clarification and Documentation Stage

A.            The objective of this stage is to clarify and document the future trading and clearing operation that mirrors the organisation’s strategic vision. The following tasks are essential to this stage: 

i.         Detailed requirements gathering and documentation of all in-scope systems, processes and people;

ii.         Development of a change management process to prepare and support an organisations trading and clearing team during the migration; and

iii.         Analysing and documenting the current environment’s skills and competencies as this will be compared to the skill and competency requirements of the selected front end and will determine whether any training will be required.

Vendor Identification Stage

A.            The objective of this stage is to identify the most appropriate independent vendor solution that meets the needs of the organisation’s trading and clearing function. The following tasks are essential to this stage:

i.         Compare required capabilities to vendor capabilities;

ii.         Compare available skills and competencies to the skill and competency requirements of each vendor’s solution;

iii.         Develop a decision model that can be used to score the various solutions; and

iv.         Conduct vendor demonstrations and use the decision model to select the highest scoring solution.

Migration and Testing Stage

 A.            The objective of this stage is to migrate from the existing front-end, with all its accompanying factors – i.e. Trading adaptors – to the selected vendor solution. This stage is also responsible for the successful development of new trading adaptors that can provide the relevant TCM’s downstream systems with the trading and clearing information required. Furthermore, testing whether the migration successfully produces the required results is also performed during this stage. The following tasks are essential for this stage: 

i.         Source to target mapping;

ii.         Development of a data conversion specification;

iii.         Data and results reconciliation;

iv.         Implementing the identified business process changes and system modification; and

v.         Performing end-to-end test runs to ensure expected results before go-live.

Through the development of a robust data migration roadmap, TCMs will be able to significantly reduce the level of complexity associated with their ITAC journey, enabling them to implement strategic solutions that ensure the long-term functionality of their trading and clearing operations.

How Monocle Can Assist

Monocle is currently assisting large TCMs with implementing phase 1 of their ITAC journey. As an industry leader in developing  bespoke and sustainable solutions that address organisations’ data demands, monocle can assist TCMs by evaluating the status of their current ITAC migration and developing an effective and robust data migration roadmap, required for a successful migration of the remaining products relating to ITAC’s subsequent phases.


About Monocle

Monocle is a results-focused consulting firm, established in 2001, that specialises in banking and insurance. Our experienced consultants translate business and regulatory requirements into tangible and data-driven results to bridge the gap between business stakeholders and IT. In so doing, we believe in operating with integrity and transparency and working closely with our clients to determine and build a unique and pragmatic solution that will solve their challenges. At Monocle, we understand that institutional and subject matter expertise are critical to the success of any consulting engagement, therefore, we believe in having our projects overseen by senior consultants with years of experience. Over the last decade and a half, we have gained extensive institutional knowledge into all areas of financial services and have consulted in multiple regions including Africa, the UK, Scandinavia and Asia-Pacific.


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