The story of how the Bombay Stock Exchange switched from a legacy system to transform into the world's fastest stock exchange
KERSI TAVADIA
BOMBAY STOCK EXCHANGE
We worked hard, conducted several mock tests for months and then switched completely to the open source platform using DuetscheBorse's T7 trading architecture based on Linux and MySQL technology (customised for the Indian market).
The talks about the need to go for a digital transformation at the Bombay Stock Exchange (BSE), the country's oldest stock exchange, started in 2010 when Kersi Tavadia was appointed as its first CIO. Tavadia had a lot of challenges at hand including convincing people to adopt latest technologies.
For the first two years as BSE's CIO, Tavadia, with a small team, worked on cleaning up the system that had been running on a traditional proprietary technology for the last two decades.
Tavadia shares that breaking traditional system or legacy infrastructure was difficult initially but the exchange adapted to change slowly and steadily and moved to complete an open source to achieve the feat of becoming the world's fastest stock exchange by 2015 that could handle 400,000 trading orders per 6 microseconds from the earlier 8,000 orders per 40 milliseconds.
Achieving this feat, Tavadia says, was not easy. “While we were at 40 milliseconds, other trading platforms in the world such as NASDAQ had a response time of 20 micro-seconds and we were asked to get to 6 microseconds by 2017,” shares Tavadia.
But a trading platform needs to be both superfast and accurate at the same time.
“We became the first trading platform in the world to make a complete switchover in one night with all the 50,500 companies, 1,200 brokers and 50,000 logins. This was when we launched our equity trading platform software BOLT Plus with a response time of 200 microseconds.” says Tavadia.
The exchange then went live with their currency derivative platform, cash derivatives and cash equity in 2014. However, while the historic transformation was happening, the old system was still working on a standby, in case the switchover failed.
Tavadia says that soon after he started working on improving the transaction speed and they did not have to wait till 2017 to achieve the 6 microsecond target. His next aim is to get to 200 nanoseconds of transaction speed in the next two years even as the BSE is preparing for its IPO. At present, the various stages of orders ie routing the order from a member server to the exchange and back to the member server, happens in just nanoseconds.
The digital transformation (from Network Time Protocol to Precision Time Protocol) has not only improved BSE's performance but has brought in high amount of transparency and fairness to all the stakeholders right from brokers to the companies listed on the stock exchange. The trade volume has also shot up incredibly. It allows the brokers to host servers near the exchange's trading platform which was not possible earlier.
Tavadia says that his team has worked hard and taken help of several start-ups such as Datamatica and Unotech Solutions during the journey of BSE's technological makeover. He adds what could have cost BSE over Rs 200 crore was done at just about 1/10th of the cost. The BSE CIO mentions that the beginning of the journey witnessed a lot of protests from BSE employees who said the idea of switchover was suicidal. It took him around a year to get all the employees and other stakeholders aligned on the same page.
While BSE is all set to achieve its next target of 200 nanoseconds much before than expected, Tavadia says a long-term strategy for technology transformation is a better idea as the technological dynamics are changing fast and every company should change with time. That is the future.
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