National Stock Exchange
A matter of equal exchange
The NSE IT team had a mission to converge and connect users
of different standards to hasten the speed of transactions. Not only did NSE
deploy a suitable solution in just 6 months, it took a quantum step towards
the target of T + 1 day transaction. by Deepali Gupta
Through Processing Central Hub
Date Started: September 2003
Date Completed: March 2004
Project Cost: Rs 210 lakh
Project Objective: A messaging hub that would interpret all the
formats and enable different networks to converse.
Benefits Accrued: Improvement in operational efficiency, reduced
time for allocation and confirmation of trade transactions.
Innovation: It's appeal lies in the implementation and not the
technology used to achieve the T + 1 day transaction target.
NSE's Straight Through Processing (STP) central hub is the first of it's kind
around the world and appears to be a major step towards a T + 1 day transaction.
A similar project was initiated in the US, but it never found a logical conclusion.
According to the NSE team, no one in the world has successfully implemented
STP due to the lack of clarity on where to begin and how to proceed.
Thats why NSE won the Computer Associates Intelligent Enterprise Award
2004 in the BFSI category.
So, where did it begin?
It began with Security and Exchange Board of India's (SEBI's) attempt to shorten
the settlement cycle. Several players jumped at SEBI's demand for a seamless
data flow solution.
What emerged were four main players and each was still unable to communicate
with the other. That meant as long as two clients were on one service provider's
network they could interact, but if they subscribed to two separate service
providers they were largely isolated from each other. And the transaction settlement
across service providers took longer and was done manually, which in turn left
room for uncertainty and error.
At this point, with SEBI's aim to reduce the transaction time to T + 1 in mind,
NSE stepped in and suggested the implementation of a messaging hub that would
interpret all the formats and enable different networks to converse.
"The implementation had both triggersbusiness need and technical
solution that was presented to the business," said Satish Naralkar, CEO,
NSE.IT, who handles all technology functions of NSE.
Sometimes the most innovative tool is made of very simple components, but its
overall functioning redefines the way people work. That is true for a paper
clip, and for this solution NSE has put forth.
The implementation does not have any complex, emerging technologies in it. However,
its impact on the number of users and the potential to impact so many more is
what makes the STP Central Hub the winner of the Computer Associates Intelligent
"The solution is more connectivity-centric than application-centric. So,
the technology, and development did not require intensive work. We just had
to keep in mind reliability, security, standards, scalability, and other aspects
like audit trails," explained Naralkar.
Small parts of a big whole
The STP Central Hub comprises a multi-tiered model and is
designed to encapsulate the complexities of the messaging layer from other applications.
The architecture is suitable for processing a large number of transactions,
scalable, and fault-tolerant. The Hub according to the NSE.IT team is specially
engineered to meet the requirements of the global financial community.
ICICI Bank Ltd. for a channel implementation
in the international banking group because it:
- Is the first Indian bank to consolidate and integrate channels for
all international locations.
- Is the first bank in India to use MPLS.
- Designed on open message formats (ISO 8583/XML) despite geographical
- Is the first general insurance company in India to get a VeriSign
Secure Server ID for the website.
- Has a single view of all insurance policies held by an individual/company.
- Integrates 'online manager' with the customer's ERP so that relevant
data can be extracted directly.
The salient features of the system are as follows:
- It has a real-time asynchronous message-driven system
- The processes can be distributed across multiple machines to achieve scalability
- It supports a fault-tolerant architecture with load balancing and clustering
- It supports any messaging protocol and uses the ISO 15022 messaging standard
- Automated messaging facilities
- Uses digital certificates for authentication
Actions and reactions
Considering that 17 lakh transactions take place on the Stock Exchange everyday,
the impact of a Hub that facilitates and speeds-up the process is huge. Thanks
to this implementation and features like automated trade communications, the
Exchange has seen an improvement in operational efficiency that results in fewer
manual errors and redundant processes in end-to-end processing of trade transactions.
Since the uncertainty between all parties on the status of the trade has reduced,
the operational risk on trade transactions has reduced too. Sending of physical
notes by fax, courier service, printing, storage, and retrieval are no longer
The operational cost of every transaction has thus decreased, and has reduced
the time for allocation and confirmation by eliminating duplication of efforts
and minimizing back-office processing. In addition to that, since batch-processing
has been eliminated, it ends fragmentation of work.
Reduction of the settlement cycle can prove to be fairly
lucrative for allthe market, exchange and the brokers in the long run.
Faster trade translates into more trade.
|"We never work towards an award, but
yes it certainly is a motivating surprise to win one. We are however, in
a habit of winning. If we hadn't won we would have been concerned, but we
have a big infrastructure and just the size of our operations gives us an
edge. But it has been an interesting project and when things go as well
as this it's always the happiest moment in any project."
Hurdles at hand
Like everything else in the world, the implementation of this project too came
with its own set of problems. The first was that testing and actual productions
were extremely unlike.
"You can never generate the same kind of numbers and variables in the testing
phase as in the actual situation," elaborated Naralkar. The first concern
immediately became, to ensure compatibility between the service providers.
More importantly, Naralkar indicated, human relation problems crop up depending
on what part of the system is functioning correctly and which is not. For that
Naralkar said, that well-debated agreements and responsibilities were isolated
for every party.
"Complete vendor neutrality had to be maintained," said Naralkar,
"and SEBI had taken charge to ensure that. In fact getting the accord to
allow NSE to own the main hub took a while to obtain for that reason."
Performance-related issues are bound to crop up every now and then when using
a general standard rather than a proprietary standard. Naralkar and his team
intend to continue tweaking the software as it finds its natural evolution.
That in Naralkar's opinion would be in the case of globalization, when this
hub would have to handle service providers from around the world.
Deepali Gupta can be reached at: email@example.com