Technology is Key Industry Challenge

Technology is a key challenge facing global exchanges, the head of the Montreal Exchange said as he explained why the privately-owned Canadian derivatives market recently developed its own trading platform. President Luc Bertrand said the group was in a "technology battle to survive" and had created a new trading system called SOLA to cope with soaring volumes.

Nearly 29 million derivative contracts were traded last year on Canada's oldest exchange, a 32 percent increase from 2004. "In the next five years we wouldn't be surprised if it doubled again," he said at a lunch with reporters on Wednesday.

The Montreal Exchange had used Euronext's ATOS structure but moved away from it and other available platforms, partly because it felt they could not be easily upgraded to deal with the high growth, Bertrand said. "Our existing infrastructure was not going to be capable of handling this growth," he said, adding that many exchanges were now faced with technology constraints.

Bertrand also said the possibility existed for Montreal to sell its new system to other exchanges. SOLA is currently used by the Boston Options Exchange, which is part-owned by the Montreal Exchange.

System capacity issues for exchanges were thrown into the spotlight in January, when Japan's Tokyo Stock Exchange was forced to close early after a barrage of sell orders threatened to overload the system.

The bourse has continued to shorten afternoon trading to avoid computer system problems and said last week it would spend 62 billion yen in capital investment under a new three-year plan.