A Look at NSE and BSE Colocation Service
Beginning in 2009 the NSE (National Stock Exchange of India) and the BSE (Bombay Stock Exchange) each established and expanded co-location facilities and services. While high frequency trading (HFT) utilizing computer algorithms and nanosecond speed has gained attention and dissension in the West, India has embraced these types of trading strategies and the Exchanges are at the center.
NSE launched their co-location services in December 2009 with an initial offering of 50 racks. The response was so positive that NSE expanded its co-location services and it has since built out to 200 racks. Charges for a full rack at NSE are Rs. 20 lakhs ($US47,000) per rack while ½ racks are offered at Rs. 8.5 lakhs (US$20,000) per half rack. There is a one-time set up charge which is Rs. 1 lakh (US$2,400) for a full rack and Rs. .5 lakhs (US$1,200) for a half rack. A profitable business indeed.
Initially, the exchange permitted only DMA and algorithmic trading on the NSE but has since changed its stance. Just recently the NSE relaxed restrictions and allowed such trades through NSE’s co-location facility to be executed on the BSE. As of the first week of September 2011 NSE had also integrated Thomson Reuters Elektron into its co-location offering which has been offered by the BSE since 2010. Elektron is an open, global, ultra-high speed cloud which incorporates proximity hosting facilities in major financial centers and high-speed global connectivity to markets and participants. MTNL, TATA, Bharti and Reliance leased lines to the collocation facility are available for the purpose of “setting up or modifying parameters, trading related activities and hardware, software, network related access, software download/upload and monitoring and data downloads.”
Basic IT services are provided per rack at a cost of R. 2.5 lakhs (US$6,000) times the number of racks. Said services include a 24/7 Help Desk, hardware checks, Level 1 incident management, on site coordination, daily reports, named resource (SPOC) for the account and Power On/Off/Boot request.
The colocation facility features dual UPS power source and 100% DG capacity, multiple precision air conditioning units with N+1 redundancy, standard 42 U rack with 6KVA power and a 1Gbps network port which will provide order and market data connectivity.
In late 2010 the Bombay Stock Exchange announced the launch of a Netmagic Solutions co-location center. Netmagic Solutions provides a managed application environment and, as mentioned, access to Thomson Reuters Elektron Global Network. The facility initially offered the ability to trade on exchanges other than the hosting venue which was not offered by NSE at the time.
BSE has 80 racks. Racks are allocated to members for their servers at the cost of Rs 4.5 lakhs (US$10,500) per anum per rack for 3KVA rated capacity. For a full rack at BSE’s co-location facility with 6 KvA (9KvA available) of average power Netmagic charges Rs 18-20 lakhs (US$42,000 – US$47,500) yearly. Apart from that, if a broker wants hardware and management services from Netmagic, it has to pay Rs 4-5 lakh (US$9,500- US$12,000) per month. Quarter racks and half racks are available. BSE racks offers 99.99% uptime SLA and custom designed racks in per-device increments of 1U, 2U, 3U.
BSE colocation facility is built as per international Tier III standards. 24×7 physical security is offered along with 24×7 advanced support. All the leading Telco’s like MTNL, Tata, Reliance and Airtel are available at the facility. Both BSE and NSE low latency data is available through Thomson Reuters Data Feed Direct (TRDFD) feed handlers.
Although the share of trading business is lopsided toward the National Stock Exchange of India, the Bombay Stock Exchange, with 20% of the average daily volume, offers a compelling alternative for the high frequency trader. NSE charges for too many cancel and replace requests viewing this as a “denial of service” while the BSE, aggressively vying for market share, does not.