exchanges facilitate faster transactions by providing
online trading portals and brokerage houses ease and
flexibility. Here's a look at the core infrastructure
of NSE, BSE, and some trading portals. by Soutiman Das
promised by technology visionaries and forecast groups
over the last decade, the Internet has indeed opened
up new avenues for conducting business. Stock exchanges
worldwide now conduct a bulk of its business online
through its brokers and partners, a major shift from
the traditional method. In developed countries, almost
all exchange transactions are conducted online. The
trend has slowly picked up in India and two of the largest
exchanges, the National Stock Exchange (NSE) and the
Bombay Stock Exchange (BSE) have been conducting online
trade successfully for sometime now.
Indian exchanges and brokering houses have been slow
to move their transactions online. This has been mainly
due to Government regulations. There was initial delay
in laying down specifications for creating Closed User
Groups (CUGs). The issue was resolved between the DoT
and the Finance Ministry around 1998 and soon trade
portals like ICICIDirect.com, motilaloswal.com, and
smartjones.com came into being.
Connectivity was perhaps the most important technological
factor. The cost of leased lines and VSAT links has
been traditionally very high and the reliability of
the links has been low. It also took a long time to
commission the links as one had to make an application
and wait for a few weeks for the link to be up and running.
Other issues like security, and backup and recovery
procedural costs were also deterrents.
Thankfully, along with the resolution of regulatory
issues, India no longer has any pressing connectivity
and bandwidth issues. With, the entry of private players
into the broadband scenario and the government opening
up the telecom sector, these issues are almost non-existent.
Security solutions and services available in the market
have matured and it doesn't cost a pretty packet anymore
to put a simple backup solution in place.
of an online exchange
Online trading involves large volumes of data
being transacted everyday. Just as an example,
at BSE the average daily turnover in 2001-2002
(April-March) was Rs 1244.10 crore and the number
of average daily trades was Rs 5.17 lakh.
Added to this there are stringent RBI regulations
that makes it mandatory for companies to store
at least 7 years of transactional and financial
Design Needs to be always-on, secure,
redundant, and have adequate backup and recovery
Storage For such high amounts of critical
data it's natural to deploy network-based storage
like NAS or SAN.
Security Security is a vital and integral
part of the design architecture. The hardware
and software elements should be built around
a layered security architecture and should be
held in place with a well-documented security
Availability Ideally online exchanges
should have 'five-nines' availability.
Applications It's difficult to deploy
out-of-the-box applications at exchanges as
each has a unique architecture based on factors
like operations flow, trading volumes, number
of members, number of users, and number of locations.
Architectures NSE has deployed NIBIS
(NSE's Internet Based Information System) for
real-time dissemination of trading information
over the Internet and NEAT a client-server-based
application to help its operations.
has deployed an OnLine Trading system (BOLT) on
a Tandem platform which has a two-tier architecture.
It claims to be able to support up to 2 million
trades a day.
on image for larger view
The NSE and BSE are among the largest exchanges in the
country. They handle very large daily trading volumes,
support large amounts of data traffic, and have a very
large nationwide network.
The trading volume figures in both the exchanges are
huge. The average daily turnover in the capital markets
segment at NSE is around Rs 2300 crore and in the derivatives
segment, around Rs 1300 crore. The average daily traffic
volume is around one million trades per day in the capital
markets segment and around 50,000 trades per day in
the derivatives segment. There are around 13,000 registered
users in both segments and an average of around 9500
users are logged in at a time.
At BSE the average daily turnover in 2001-2002 (April-March)
was Rs 1244.10 crore and the number of average daily
trades was Rs 5.17 lakh.
Needless to say, any online exchange needs to be always-on,
secure, redundant, and have adequate backup and recovery
processes. G.M Shenoy, VP, NSE-IT, talks about the design
philosophy of his online exchange. "The basic design
objective was to provide fair, equal, and transparent
access across all our nationwide locations. An important
aspect was to provide connectivity to our trading members
as soon as possible."
"The telecom sector is fairly liberal today. Back
in 1993, the technology was maturing and was costly.
Leased lines cost almost ten times as much as it does
today. Satellite technology was a boon since it allowed
quicker deployment than leased lines. NSE now has the
country's largest VSAT network with over 3000 VSATs
and expects to grow to more than 4000 VSATs soon."
A look at the massive trading volumes and traffic bulk
is enough proof of the critical nature of systems. It
makes one shudder to think of the expected losses in
case of a ten minute downtime when daily trade crosses
Rs 3000 crore. Network elements like storage, security,
backup and recovery processes, availability, and the
different applications must be carefully planned and
commissioned. Then one has to follow stringent RBI regulations
to store at least 7 years of transactional and financial
Storage For such high amounts of critical data it's
natural to deploy network-based storage like NAS or
SAN. NSE is implementing a SAN as it feels that its
data volumes have grown 'phenomenally'.
Security This should be a vital and integral part of
the design architecture. The hardware and software elements
should be built around a layered security architecture.
And it should be held in place with a well-documented
Shenoy says "Security is the most crucial element
in the network. All applications have been built with
a conscious approach towards security. The security
policies are tightly integrated and regularly scrutinized
to leave no room for compromise. All the applications
and OSs are hardened periodically for safety."
Backup and recovery This has emerged as one of the vital
aspects of business continuity. When online exchanges
were designed a few years ago, perhaps a lot of emphasis
was not placed on this aspect, as it is today. However
it's not difficult to add business continuity processes
to an existing network.
Shenoy says, "As a backup to our VSAT network,
a terrestrial-based trading network was deployed in
the middle of 2000. We have more than 850 leased lines
connecting our nationwide locations. We are the only
stock exchange in the country to have a fully-redundant
business continuity site in Chennai."
Availability Ideally online exchanges should have 'five-nines'
availability. Exchanges usually prefer to host its infrastructure
in-house and not use the services of an external data
NSE claims to achieve uptime greater than 99.9%. "This
is mostly due to internally formulated procedures and
continuous review of SLAs with hardware vendors,"
Applications It's difficult to deploy out-of-the-box
applications at exchanges as each has a unique architecture
based on factors like operations flow, trading volumes,
number of members, number of users, and number of locations.
The applications like trading, clearing, risk-management,
surveillance, index computation, listing, membership,
and accounts may be developed in-house or by external
The 'big two' architectures
NSE and BSE, the 'big two' exchanges believe in updating
and upgrading its technology systems to keep delivering
according to commitments and promises made to its members,
partners, and customers.
NSE architecture - NEAT
NSE has deployed NIBIS (NSE's Internet Based Information
System) for real-time dissemination of trading information
over the Internet and NEAT a client-server-based application
to help its operations.
NEAT stores all trading information in an in-memory
database at the server end to achieve minimum response
time and maximum system availability for users. The
trading server software runs on a fault-tolerant STRATUS
mainframe and the client software runs on Windows PCs.
The telecommunications network uses the X.25 protocol
and is the backbone of the automated trading system.
Each trading member trades on the NSE with other members
through a PC located in the trading member's office.
trading members on the Wholesale Debt Market segment
are linked to the central computer at the NSE through
dedicated 64 Kbps leased lines and VSAT terminals. These
leased lines are multiplexed using dedicated 2 MB optical-fiber
links. The WDM participants connect to the trading system
through dial-up links.
The exchange uses RISC-based Unix servers from Digital
and HP for backoffice processing. Applications like
Oracle 7 and SQL/Oracle Forms 4.5 front ends are used
for the exchange functions.
BSE architecture - BOLT
BSE has deployed an OnLine Trading system (BOLT) on
March 14, 1995. It works on a Tandem S74016 platform
running on 16 CPUs. The Tandem Himalaya S74016 machines
act as the backend to more than 8000 Trader Workstations
networked on Ethernet, VSAT and Managed Leased Data
Network (MLDN). The systems claim to handle up to two
million trades a day.
BOLT has a two-tier architecture. The trader workstations
are connected directly to the backend server which acts
as a communication server and a Central Trading Engine
(CTE). Other services like information dissemination,
index computation, and position monitoring are also
provided by the system. A transaction monitoring facility
in the Tandem architecture helps keep data integrity
through non-stop SQL.
With the help of MTNL, BSE has setup a MLDN Network
comprising 300 2 Mbps lines and 1500 64 Kbps lines which
connect all regional stock exchanges and offices in
Mumbai. Access to market related information through
the trader workstations is essential for the market
participants to act on real-time basis and take instantaneous
decisions. BOLT has been interfaced with various information
vendors like Bloomberg, Bridge, and Reuters. Market
information is fed to news agencies in real time. The
exchange plans to enhance the capabilities further to
have an integrated two-way information flow.
Online trading portals
Online trading is the investment activity that takes
place over the Internet without the physical inclusion
of the broker. An end user (investor) has to register
with an online trading portal like ICICdirect.com, motilaloswal.com,
smartjones.com, and sharekhan.com. The investor thus
gets into an agreement with the firm to trade in different
securities according to the terms and conditions listed
down on the agreement. Since the servers of the online
trading portal are connected all the time to the stock
exchanges and designated banks, order processing is
done in real time. Investors can also get updates on
the trading and check the status of their orders either
through e-mail or through the interface.
Harish Malhotra, Chief Technology Officer, Motilal Oswal
Securities Limited, says "the portal should be
simple to navigate, full of useful and relevant information
which is available with the lowest number of clicks,
and should be personalized." However a very important
aspect is that the systems should be able to interface
directly with that of the online exchanges without incompatibility
ICICIdirect.com uses 128-bit encryption enabled Secure
Socket Layer (SSL) to ensure that the information transmitted
across the Internet is safe and cannot be accessed by
a third party.
Users are usually given options to link their bank accounts,
Demat accounts, and brokerage accounts into a single
interface. There is also a single window for all exchanges
and a single screen for the complete order routing mechanism.
The hardware used comprises Web and application servers,
switches, routers, firewalls and security devices, and
Motilaloswal.com uses Compaq servers for applications
and database, Cisco routers, and Checkpoint firewalls.
The systems have been customized by its in-house team.
The trading applications are outsourced. "We also
have offline storage which is backed up periodically
at separate locations," says Harish.
The success of a trade portal will definitely depend
on its bouquet of services for an end-user. Most portals
charge a small registration fee and brokerage based
on various conditions. However it's important for the
organization to keep focussed on customer-centric services
and delivery models to actually enjoy the most attention.
Soutiman Das Gupta can be reached at