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