An interview with Niguel Brooks


Sainsbury: What are your priorities for the next 12-18 months?


Brooks: My teams priorities are focussed around three broad areas which underscores our corporate strategy; firstly to create value by designing innovative solutions to expand our business. Secondly, achieving operational excellence through building robust, scalable and secure systems governed by standards and sound processes, and lastly to optimise and leverage our new infrastructure to provide agility. 


To elaborate further on the last point, last year we completed a major IT transformation which involved re-architecting our datacentres, core network and storage infrastructure, delivering a new trading platform and building a state of the art co-location facility. We will continue this transformation work by refreshing of our legacy mainframe based Securities Clearing and Depository system and introducing a new Risk Management System to support more complex asset classes and near real time risk management functions. In addition to these we will continue to focus on the next layer down; reducing inter-system complexity, strengthening information security, automating manual tasks and improve our competitive IT cost base.


Although I said three main areas, finding quality staff with financial markets experience and the right mindset is always on my priority list.


Sainsbury: What would you say are the greatest technological challenges facing Exchanges at the moment, and how is Singapore Exchange managing those?


The battle to introduce more sophisticated technologies continues; Innovation in the area of exchange technology is fierce as we compete on speed and deterministic latency, lower transaction costs, new functionality like mid-point order types, and capacity to handle unlimited volumes. These advancements along with zero tolerance to technical issues, rising costs of technology and increase regulatory obligations can place an exchange at a disadvantage to the less regulated and potentially more nimble alternate execution venues and broker internalisation / crossing systems.


However this has not deterred SGX from responding to this increased competition.  We have continued to invest in technology, staff development and have demonstrated our execution capabilities by being one of the first exchanges to offer OTC Financial Derivatives clearing facility, Pre-Trade Risk Controls and Co-location services.


Sainsbury: What impact do you see Dark Pools having on the approach to technology at Exchanges into the future?


Brooks: Dark Pools have a similar impact to Exchanges as broker internalisation systems. They are competing for order-flow and endeavouring to improve price and/or reduce market impact. Many Exchanges have responded to this development with the introduction of their own dark order types or have developed their own dark pools.


SGX had entered into a joint venture with Chi-X to develop a dark matching venue called Chi-East. The success of the dark pools and alternate matching venue will mainly come down to a few factors, one being how sophisticated the market is. That being, is there critical mass among the broker systems to take advantage of the alternate liquidity pools and do they have the necessary smart order routing (SORs) technology to direct order flow to these venues. Without this level of sophistication and the potential for increased regulatory obligation, it is difficult to sustain a viable dark pool in Asia.


Sainsbury: What opportunities do you see in social media and other customer engagement tools for Exchanges?


Brooks: Social media through our Facebook page has proven to be an effective channel to our engage our customers and various stakeholders. We are also using this channel for investor education and to build brand awareness. Notwithstanding these benefits, we are taking a caution approach to world of social media to ensure we developed the right level of capability to manage the communications and monitor customer sentiments.

What long term effects do you think High-Frequency Trading (HFT) will have on your approach to and management of technology?


Brooks: HFT has yet to take a strong hold in the Asian, where the right market conditions to support the HFT and Algorithmic trading in the equity market is still evolving. Many of the exchanges in the region are upgrading their technology and data centres in preparation for the rapid developments of electronic trading. Having the right technology with low and deterministic latency, capacity to cater for an explosion in order and trade rates and the robust infrastructures such as; co-location facilities, high speed networks and microsecond latency monitoring tools have become the necessarily baseline.


On the other hand, HFT is a segment of the overall market which brings with it benefits in terms of improved liquidity and tighter spreads, but exchanges must be cognisant of the potential long term effects this development has on the market, if not managed correctly. The increase in order and trade flows derived from HFT and electronic and the resulting market data is likely to place costs pressures on the exchange and market participants as a whole to process and store this information. 


SGX is mindful of these effects and the need to maintain a trusted marketplace, which caters for all constituents.  By ensuring we make the right investment decisions, managing the rate of technology change, the risks associated with change, implementing the necessary market safeguards, and improved market surveillance to detect improper behaviour is paramount to our business. In addition to these, we have taken steps to offering differentiated services to allow our customer to select the market segment that is of interest to them and ensuring the frictional cost of trading remains competitive and viable.


Sainsbury: What impact is the regulatory impact having on Singapore Exchange’s ability to be innovative with technology?


Brooks: It would be hard not to mention in light of the recent trading glitches, the inherit risks associated with deploying and managing complex and sophisticated trading technologies. The number of incidents and losses that have occurred in the market has affected investor confidence.


Regulators, exchanges and various industry bodies are introducing rules and regulation to address these risks, in order to prevent future incidents and to restore investor confidence. SGX has tackled the issues experienced by the other markets through a strong IT governance framework to manage technology risk, developed safeguards to prevent or limit the impact of similar incidents and is investing in technology to monitor in real-time the trading behaviours and real-time risk exposure. 


Sainsbury: How do you see the role of Cloud computing evolving within financial services?


Brooks: I do not foresee Cloud computing making a huge impact in the financial services sector due to the complex and regulated environment, which we operate in. The issues around security, data sovereignty, co-mingling of data and the high level of governance required to operate the service will limit the use cases and benefits of Cloud within the financial sector at this point in time.


Sainsbury: If you weren’t working in technology and financial services, what would you be doing?


Brooks: Considering the amount of coffee I drink it would have been nice to own a coffee shop, café or two.


Sainsbury: Who in technology inspires you?


Brooks: Two people had made an impression on my career; Ken Olsen who was the co-founder of DEC (Digital Equipment Corporation) the company I worked for during my early years and Steven J. Sasson, who invented the first ever digital camera.  The camera, which initially weighed 8.5 pounds and was the size of a toaster, is now a part of everyone’s daily life. It has transformed the world we live it, and has significantly improved my photographic skills.


Sainsbury: Every IT leader, particularly at your level, has a legacy they wish to be remembered for. What is yours?


Brooks: To be remembered as a business leader would be the ideal complement and having developed the next generation of IT business leaders within the technology team I run.