Markets

BSE ups speed to pull ahead of competition

RAGHAVENDRA RAO S SHANKER Mumbai | Updated on January 28, 2014 Published on January 28, 2014

The exchange has acquired the new technology from Deutsche Borse, which holds a 5 per cent stake in it.



The 140-year-old Bombay Stock Exchange, which moved currency derivatives to its new technology platform on Tuesday with a response time of 200 micro seconds, has taken the fight for the top slot in speed to its competitors.

(One second equals 1,000 milli seconds or 10 lakh micro seconds. Response time or latency is the time taken by the exchange to disseminate price quotes.)

“We are currently providing a response time of one-hundredth of a second and it will become one by 5,000th of a second and in a few years time one by 50,000th of a second. It is significantly faster across exchanges here,” said Ashish Chauhan, CEO, BSE.

This is for the first time that BSE has become several times faster than competition. And in the financial markets, the early bird catches the worm, he said.

It is learnt that the NSE offers a response time of ‘about 200 micro seconds’. It has a capacity to handle over two billion order messages daily and can scale up at very short notice.

According to marketmen, even marginal fluctuations make a difference in trade.

U.K. Sinha, Chairman, SEBI, at an algo conference in Mumbai on Monday, said there is an increasing tendency among people to look for brokers who offer nano and pico second speeds of execution. (one billion nano seconds make a second, and one trillion pico seconds make a second). “Where is this race going to end?” he wondered.

Chauhan said in 1994, trades shifted from the BSE to the NSE because of speed. Internationally too, newer exchanges have taken the lead over older ones which remained slower.

BSE has acquired the new technology from German exchange Deutsche Borse, which holds a 5 per cent stake in it. BSE has a revenue sharing agreement with Deutsche Borse to cut the acquisition cost.

Chauhan said the new system can handle 5 lakh orders a second.

On the importance of speed, he said it was like a 100-metre dash in the Olympics. Earlier, it was measured in two decimals and now it has gone to the fourth decimal.

Moreover, with algo traders providing 90 per cent of orders, they move where speed is. In algo trading, programmed software responds to market movements at phenomenal speeds across multiple destinations. The programmes are designed to capitalise on the slightest price movements. And given the large volume of trades being done, split second differences turn losses to gains and vice versa.

Chauhan said BSE started the currency derivatives in December 2013 and in 45-50 days garnered 18-20 per cent market share. In February, BSE’s equity derivatives will move to the new platform.

Published on January 28, 2014
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