Technology is what drives the 200,000 terminals of BSE across the world

DQI Bureau
New Update

Bombay Stock Exchange (BSE), the oldest bourse in India, went through a

major senior leadership revamp in H2 2009 just when the first signs of revival

were on the horizon. And one of the first few appointments included that of

Ashish Chauhan, who was with the Reliance Group for close to six and a half

years, and decided to move out to where he came from: the bourses. Chauhan who

was Reliance Industries CIO before moving to the role of CEO in Mumbai Indians

(an IPL franchisee owned by Mukesh Ambani) was in the founding team of NSE.


Having moved to BSE, he has spearheaded some turnkey technological

developments including the setting up of a new exchange platform, a mutual funds

trading platform, expansion projects to enhance trade capacity and much more. He

also played a key role in BSEs acquisition of Marketplace Technologies. In a

discussion with Dataquest, Chauhan talks about the recent product as well as

technological developments which will give BSE a major facelift.

Since your appointment as the deputy CEO at BSE in September 2009 and the

senior leadership revamp, what have been the immediate areas of focus?

Basically, there are three focus areas, which integrate into each other. The

first has been towards differentiating our products, defining newer products,

better marketing, and educating and training our traders and investors about the

various nuances of the products. The product aspect is of utmost importance for

financial markets as it is highly regulated, requiring in-depth knowledge of the

regulatory compliance framework. Also, as products in the financial markets are

conceptual they can be launched quicker than a physical product.


The next key area of focus has been technology as the market business has

become more of an applied technology business. Technology is what drives the

200,000 terminals of BSE across the world. Today, not just humans but even

computers are trading based on algorithms at these terminals. The platform not

just has to be able to continually support the trading of existing products but

also be flexible enough to come out with newer products. The technology platform

at BSE not only manages trading but also carries out functions such as clearing,

settlement, risk management (in real-time), margining, etc. So the IT

infrastructure has to be extremely flexible and scalable while not compromising

on factors such as risk management.

The third focus is aligning the people within the organization to create

newer technologies and products and offer them to the clientele which include

members, small investors across India, FIIs, mutual funds, banks, etc.

BSEs share of trading volumes had dropped to 27% in 2009. There has been

a lot of talk on BSE competing with NSE and Financial Technologies on the stock

exchange technologies front. Your comments?

You can say that we do compete on technology, and at the same time we dont

because it is the product that is the differentiating factor and technology is

ultimately the enabler for companies such as BSE or NSE.


What is the big differentiating factor for BSE today?

The financial markets are highly competitive today. One of the key steps

taken to stay within this competition is to strike alliances with users,

stakeholders and exchanges that include banks, small investors, large investors,

brokers, etc, and bring them onto our platform. One of the larger initiatives

taken by BSE in this direction is called the United Stock Exchange where BSE is

a co-promoter with almost twenty-nine banks. It focuses on interest rates and

currency derivatives and has almost all PSU banks and certain foreign banks as

promoters. Through this alliance, the promoters not only benefit from the

efficiencies brought in by the trading platform but also reap the benefits of

the upside in valuation when a certain product become successful. So, it is a

kind of virtuous cycle that gets created, where a large part of the market is

participating in an exchange as owners.

We have also recently launched a mutual fund distribution through the

exchange platform called BSE StAR; BSE has the lions share (almost 75% share)

of the mutual fund trading on the exchange platform. In terms of technology, we

have launched a new platform for order routing called fast trade which has a

better UI compared to the earlier platform. It also connects into multiple

exchanges instead of a single exchange. We have also launched a framework to

enable faster distribution of feeds (almost five times faster than before). We

have also launched mid-month expiry for derivatives; have rationalized our

settlements framework and revamped our website. Today, our website is available

in about seven regional languages and is also the largest website in the

exchanges sector. We are in the process of inducting new components and hardware

to enable capacity expansion; revamping the DR site; and are gearing up for

mobile based and algorithm trading. Going ahead, we would like to take a lead in

areas such as SME exchange.

We are trying to bring in more such innovation in the technology as well as

product offerings to regain lost ground to other exchanges.


What is your view on newer technologies such as mobile trading?

Once mobile platforms based trading is allowed it will significantly

increase the reach of financial markets. Despite the 150 year history of BSE and

the capital markets in India, the number of people participating in stock

markets or mutual fund markets is less than 2 crore. We still have to reach out

to about 118 crore people. Even the RBI has recognised this need and has issued

policies for mobile based transactions. This would necessitate many changes in

our IT infrastructure, which we have already anticipated and are taking steps to

prevent any bottlenecks.

How has the acquisition of Marketplace Technologies benefited BSE?

The newly floated MCX-SX has Financial Technologies as its front end tech

provider while NSE has tied up with Omnisys. BSE did not have any such

technology partners, which was affecting its growth to a great extent. This was

the key reason for the MT acquisition. MT has strengthened our IT capabilities

to a great extent.

What is your opinion about new age technologies such as cloud, SOA, etc?

Standards and newer technologies create the requisite differentiation for

any organization. Companies which are able to quickly adapt to emerging

technologies and frameworks such as cloud and SOA will be able to succeed in

reaching out to their stakeholders much faster. In our industry, FIX standard is

a very important benchmark. However, Indian exchanges have either not adhered

their feeds to the FIX standards or have used the older versions of the same.

So, we are in the process of adopting FIX and deploying XBRL for updating

financial results.

Priya Kekre