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Issue of April 2003 
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Case Study: CDSLís Network Upgradation
Upgrading a growing network at CDSL

CDSL built its network, attained technological maturity, and is now future-ready. A look at the strategies it employed to make it possible. by Soutiman Das Gupta

The Central Depository Services India Limited (CDSL) was established in 1999 and is the second securities depository in India. Its objective is to provide convenient, dependable, and secure depository services, and facilitate holding of Demats (securities in the electronic form).

Its network covers 100 cities and offers always-on connectivity to around 500 centers nationwide. The company has handled Demat for over 8000 million securities settlements. The number is still growing and will continue since the government plans to phase out physical trading of shares. This will compel every transaction at any stock exchange to be processed at an online depository.

In a nutshell

The company
The Central Depository Services India Limited (CDSL) provides depository services and facilitates holding of Demats (securities in the electronic form). Its network covers 100 cities and offers always-on connectivity to around 500 centers nationwide. The company has handled Demat for over 8000 million securities settlements.

The need
To effortlessly service a growing volume of securities, Depository Participants (DPs), and users, CDSL had to upgrade its network and work seamlessly.

The solution
CDSL upgraded aspects like connectivity, applications, hardware, software, and deployed a disaster recovery site.

The benefits
The upgraded network offers Straight Through Processing (STP) and will help the company achieve a T+2 settlement mode.

Click on image for larger view

Numbers and the need
CDSL connects to 172 Depository Participants (DPs) nationwide through its network which supports 149,832 investor accounts and spans 355 branches. Every branch has access to the company's online database.

A minute's downtime will severely affect the daily operations of the capital market. To ensure efficient operations which is reliable, free from downtime, and able to support the growing number of users, CDSL had to strengthen its network elements like connectivity applications, and hardware.

As a solution the company made an elaborate plan and upgraded its connectivity, software and hardware. It is now ready to achieve its objectives without interruption and fear of downtime in future.

Upgrade strategies
Pramod Deshpande, Vice-President, IT, CDSL, used the following strategies to plan the upgrade path.

  • Upgradation was strictly need-based. The nature of business was studied in detail.
  • Realistic projections about future market size and demand were made.
  • A service provider's facilities were used to take advantage of an established and tested network infrastructure.
  • Connectivity mechanisms to nationwide locations were upgraded and made reliable.
  • Software applications were tried, updated, and newer versions purchased/licensed.
  • Hardware systems were replaced with better and scalable configurations.
  • Additional reserves of resources whose needs are not always anticipated like fail-over, disaster recovery, and bandwidth were deployed.

A management challenge
Pramod felt that it was a challenge to justify the investment involved in upgradation, to the higher management. "The IT Head can't simply tell higher management that he got the feeling, or read in a magazine, that something may happen, and its necessary to upgrade," said Pramod. "The IT Head has to justify the expenditure and define the business advantages likely to be received from the exercise."

Need-based upgrade
CDSL felt that the number of nationwide DPs and volume of Demat custody and settlement was growing at a quick pace. And when Dematerialization of shares would become mandatory, there would be a huge increase in network traffic and subsequently load. An upgrade was thus considered essential for the company to continue uninterrupted operations.

BSE as the service provider
CDSL uses BSE- The Stock Exchange Mumbai, as its service provider. CDSL has been promoted by BSE along with a few Indian banks. This prompts BSE to have a considerate view of the operations at CDSL. The two organizations work hand-in-glove in their daily activities. The other reasons are:

  • BSE already has a sound nationwide network infrastructure that CDSL can piggyback on. There's no need to re-invent the wheel.
  • BSE's network infrastructure is in the same building and the physical proximity helps in coordination.
  • BSE has an efficient team of technical personnel who perform 24x7.

Since leased lines were not easily available in remote cities in 1999, the company used VSAT links. Earlier, all users were in the same pool and were allotted a fixed bandwidth for in-route traffic. If a file was larger than the allocated bandwidth, the user had problems in uploading.

The problem was eliminated in January 2002 by using a flex-route concept. In this a user can utilize additional bandwidth from the pool if the file size is more than the allocated bandwidth. This has improved user response time.

The VSAT IDU (Indoor Unit) used to work in a 'bridge' mode with a single large subnet which allowed only six workstations. In July 2002 the IDU was programmed to function in a 'routing' mode. This allowed more workstations to be connected on a subnet.

In September 2002 a Channelized E1 leased line was implemented with fiber at the CDSL termination end. This offers better response time, minimal downtime, and scalability to handle higher volumes of transactions in future. CDSL also uses 64 Kbps leased lines between cities to link its DPs. The links between the CDSL main site and the Disaster Recovery (DR) site were also upgraded to four Mbps. The whole exercise will now enable CDSL to have a seamlessly functional DR site.

Software applications
Pramod said, "After three years of operations we faced scalability and time-related problems. This was the indication that the application software needed to be fine-tuned." A large number of software upgrades and enhancements were made to this effect at CDSL. Some of them are:

  • Keeping in mind the evolving capital market, enhancements and fine tuning of the architecture and code of the customized banking software was made. The application was developed by CMC,
  • The database was migrated from Oracle to Oracle 8.7.1 on April 14, 2002 and runs on a centralized architecture. CDSL found bugs in the older version. Oracle 8.7.1 offered better performance, advanced backup features, and stability.
  • The database architecture uses a Straight-Through Processing (STP) system, which ensures instant recording of any sale/purchase action by the investor and is added to the investor's account. It benefits DPs since they have to make lower capital expenditure to provide depository services.
  • Users complained that the Operator Console (Opconsole) did not reconnect and re-register after connectivity loss or server time-out. This slowed down the download of daily reports. A new functionality was added to the Opconsole application on August 25, 2001 and the problem has been addressed.
  • CDSL introduced early pay-in for NSE and BSE on November 09, 2001. The early pay-in facility can be used by Clearing Members/ Beneficiary Owners by issuing appropriate instructions to the DPs.
  • The company's redesigned Website with new features was floated on April 22, 2002. Users can view their balances which are refreshed every 30 minutes, and transaction details of the last seven days.
  • The display of Start of Day (SOD)/End of Day (EOD) time in the master menu was introduced on December 8, 2001. A mouse click displays the actual SOD time and the EOD time for the business day.
  • The inter-depository debit/credit job step was fine-tuned in June 22, 2002. This resulted in reduction of processing time—from one hour to 10 minutes.
  • Inter-depository upload has been reduced from 200 records in one minute to 2000 records in a minute from June 29, 2002.
  • A program called hostip.exe was implemented on May 18, 2002, at every user's front-end to help change IP addresses in case of a shift from VSAT to leased line.

CDSL upgraded its V-series of HP servers to two HP rp7410 servers. These are mid-range servers that run on the HP-UX 11i OS. Pramod said, "The servers provide us architectural and performance advantages. Their performance is at least three times better than the previous servers."

The servers are used in failover mode rather than load-balancing mode. "This allows scalability in case of increased load," said Pramod.

The company also uses storage solutions from EMC which are near fault-tolerant systems. They feature multiple RAID levels and intelligent diagnostics like automatic disk fault finding system.

Disaster Recovery
CDSL had a basic Disaster Recovery (DR) site in Nucleus House at Andheri, Saki Naka, in Mumbai. On February 01, 2002 it shifted the DR operations to Reliance Infocom's data center at Navi Mumbai.

The new DR site has features like:

  • Vibration-proof, EMI/Radio Frequency interference-proof, flooding and environmental pollution-proof, tightly sealed, and thermally insulated architecture.
  • Three layers of power supply. Main feeders from MSEB, dual diesel generator sets, dual UPSs. Dual electricity distribution system.
  • Precisely controlled environment for humidity, ventilation, and air conditioning.
  • High sensitivity smoke-detection system.
  • Centralized operations from building management system.
  • Multiple layers of physical security.
  • Stringent fire detection and protection norms.
  • Located at a different seismic zone from Mumbai.

Technological maturity
After handling the company's upgrade according to its upgrade strategy, the company felt that it had achieved a respectful standard of networking technology. "In March 2002 we felt we had achieved technological maturity and were at par with market expectations," said Pramod.

CDSL moved the system of settlement from a 'paper format' to a T+3 mode (pure electronic format). CDSL began online inter-depository transfers, where movement of stocks between depositories takes place throughout the business day. The Indian Finance Ministry has announced destination dates for the Indian capital market to move to a T+2 settlement regime by April, 2003. CDSL hopes to achieve the target well within the deadline.

In line with global trends, CDSL plans to implement an Electronic Contract Note System (ECNS) which is a step towards STP and will help the company move from a T+3 mode to T+2.

The company plans to deploy VPN links among nationwide locations. The idea will be to connect the interior/remote locations of the country. But problems like unreliable connectivity from telecoms, limited penetration of the Internet, and limitations of certain vendors have to be overcome.

Soutiman Das Gupta can be reached at

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