Speed Is the Key

Anil Nagrath thought he had a clear edge over other investors: a thorough
understanding of the stock market, and Internet-savvy, backed by fiber to his
desktop in Mumbai–for 24-hour high-speed Net access.

Two months ago, he got a tip–the market was likely to move upward. He
quickly checked the balance in his demat and bank accounts and looked at the
current prices of his favorite stocks on his broker’s Web site. In a few
minutes, he had placed his orders with the broker.

BSE’s Net Sortie:
How To

1. The investor can log on to
and select the broker (or his sub-broker or branch). To register, however,
the investor has to contact the broker off-line

2. The broker receives the intent of registration through the
BSEWebx system and sets up the risk management limits (including exposure
limits for purchase/sale, trade categories, types of scrips, carry forward
and delivery) according to the profile of the investor. The investor is
then sent an e-mail confirming the registration. It also contains the
password for future transactions. The investor is now ready to trade

3. The investor places an order for a scrip that is part of his
profile. The order undergoes a risk management validation to ensure that
it doesn’t go beyond the investor’s risk profile. Once through, it’s
sent to BOLT for execution. In case of any rule violation, the order is
either rejected or sent to the broker for a real-time review

4. The review is done at the broker’s end in real-time using
the ‘broker administration terminal’. The broker may revise the
profile and decide whether to release or reject the order

Much later, Nagrath found that his “instant online” prices were
more than 15 minutes old, putting him at a disadvantage enough to get his
profits down significantly. Because that morning, prices fluctuated severely.

Clearly, the much-touted online trading was not a real-time affair. And there
were further time lags between various stages of the transaction.

Nagrath and other online investors are better off now. There’s,
an “exchange-enabled” system of Web-based order routing. The system
allows almost instant brokering, as all the brokers are nestled on the BSE’s
own network, and all the registered users’ database is centrally managed.
Kalpana Maniar, GM,, says, “Exchanges without such a facility
do nothing except opening up the messaging structure to their trading system in
respect of orders routed to them through the Internet.”

Integrating All the

It’s only to complete the formalities of registration
that an investor needs to contact the broker offline. Everything else,
from placing an order to validation, review and execution, is done
online. All this is centrally managed by the BSEWebx system

Created with an investment of around Rs 15 crore, is aimed at
providing capital market services like content, wired and wireless Internet
trading, and payment and depositary interfaces. The investors use a private
network while brokers are connected through the BSE’s own network system. BSE
has opened up the messaging structure to its trading system, and is providing
the centralized infrastructure and software applications to its member-brokers
so that they need not create their own systems. Other aspects include
centralized trading and risk management and a possible multi-routing to other
exchanges in the future.

Load balancing

When a lot is at stake in the market, even a minor error can lead to
unimaginable losses for brokers and investors alike. Srikant Rao, country
manager, BEA Systems, which implemented the BSEWebx system, understands this. He
points out, "With more than 550 brokers and thousands of investors online–the
system should guarantee that every transaction happens, within seconds, 24 hours
a day." The Weblogic server used in the BSEWebx system ensures this through
its clustering facility, which has multiple servers.

The BSEWebx trading system uses a three-tier architecture, using the open
standard. It utilizes high-end Compaq servers. The core of the system is
deployed on BEA WebLogic, a Web application server based on Java, and Tuxedo, a
middle-tier server for C-based programs. The servers are clustered, which enable
high availability, load balancing and transaction integrity. The transaction
protection and database access is managed using Tuxedo servers. The business
logic has been developed using Enterprise Java Beans (EJBs) and the user
interface is written using Java server pages. The BSE system is integrated with
the back-end BOLT (BSE online trading) system running on a Unix-based server,
Tandem. The investor’s call is made by Tuxedo to push the message and get the

BSE servers can load balance across multiple servers available at the
exchange when there is an increase in load. Rao says, "If there is a
transaction at one server, there is a shadow transaction at another one."
In the event of a failure of any of the systems or network components, sessions
can be migrated elsewhere, using an application, so that users continue to have
access. The application has been developed by Tata Consultancy Services.

Risk management

Essentially, risk management is centralized with all risk profiles of
investors registered through BSEWebx stored in a central database. "This
ensures that the incoming order is always checked against an up-to-date risk
profile of the investor," says Maniar. "Moreover, centralization helps
in achieving better response time as the orders do not have to go to broker
back-offices for validation and can go directly to the exchange for execution if
within risk limits defined." Currently BSEWebx routes orders to BSE only.
However, the entire architecture is extensible to route orders to any exchange.
Maniar feels that "this multi-exchange routing can be achieved in a phased

Just like other broker developed online trading sites, BSEWebx also routes
orders coming from Internet to the BSE trading platform. The only difference–BSEWebx
is a centralized system where all incoming orders are validated for risk
management centrally and are routed to the exchange trading system. On the other
hand, in other broker-developed systems, Net-based orders first go the broker’s
back-office for risk management validation and are then routed to the exchange
for trading.

How Centralized Risk
Management Helps

  • The risk profiles of
    all investors registered on BSEWebx are stored in a central
    database. Incoming orders are always checked against up-to-date risk
    profiles of the customers without going through the brokers’ back
    offices for validation. This ensures better response time

  • The BSEWebx encourages
    healthy competition among brokers, bringing maximum gains to the

  • Investors are kept
    informed of every stage of every order until execution. In case of a
    change of mind, an order can be cancelled before execution.

BSEWebx is built on a business model where BSE encourages members to take
initiatives to build their own Internet trading system or participate in the
centralized model. The objective is to encourage healthy competition within the
industry and bring maximum gains to the investor.

The system offers risk management at all hierarchies–broker vis-a-vis
sub-brokers and branches. The system is extensible for multi-product and
multi-mode delivery including the wireless Internet. It also provisions for
connectivity to a payment gateway and depository in subsequent phases. So,
BSEWebx is more than just an Internet order routing system. It acts as a digital
nerve center for transactions, bringing multiple entities together. "High
costs are involved in setting up an Internet-based trading system today. Add to
that factors like technological obsolescence, and a majority of brokers won’t
have the wherewithal for maintaining and upgrading such systems at their
ends," adds Maniar. She is confident that the business will increase once
the infrastructure bottlenecks are removed.

Bijesh Kamath–Dataquest

One response to “ Speed Is the Key”

  1. Saqib says:

    Not interested

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