BSE ropes in telcos to cut connectivity costs

After becoming members of the Bombay Stock Exchange (BSE) for a cheaper fee, stock brokers will now be able to connect with the bourse at a lower cost. The reason: BSE has tied up with telecom operators to use their point of presence (PoP) terminals, through which brokers will be able to connect with the exchange at a annual charge of just Rs 99,000 instead of the over Rs 5 lakh it costs to connect with the exchange through leased lines.

A PoP virtually brings the stock exchange to the respective cities for facilitating a faster access to its servers. This brings those whose offices are located in remote places on a par with traders located close to the exchange in Mumbai. For instance, a member trading from Delhi, instead of connecting to BSE in Mumbai, will connect to the Delhi PoP. So, the entire process becomes a kind of a decentralised access to the exchange.

According to BSE, PoPs in Delhi had been made operational for brokers last week and, in the coming days, brokers from Kolkata, Ahmedabad and Chennai will also be able to connect with BSE through similar PoPs. This will bring down the cost of connectivity as well as cut the time it takes for a transaction to around 30 milliseconds.

BSE has saved huge amounts of money in building its own network of PoPs through tie-ups with telecom vendors like Bharti Airtel, Reliance Communications, Tata Communications, MTNL, BSNL and Tata Teleservices, who will provide leased lines with speeds of up to 2 mbps.

The BSE has a market share of nearly 30 per cent in the cash segment of the exchange-traded equity market in India and its trading platform BOLT has a capacity to handle over 10.8 million trades each day. So, the introduction of cheaper access to such fast PoPs will further help BSE in significantly increasing the number of trades. In fact, according to sources, the exchange is already in the process of doubling its capacity to handle daily trades.

BSE recently brought its futures and options trading onto a single platform, and introduced the world’s first centralised exchange-based internet trading system – BSEWEBx.co.in – to enable investors to trade on its platform from anywhere in the world. The exchange also tied up with US’ top stock exchange, the NYSE Euronext, to cater to the demand for high-speed trading, low latency data feeds, co-location and other services supporting automated trading.

BSE recently brought its futures and options trading onto a single platform, and introduced the world’s first centralised exchange-based internet trading system – BSEWEBx.co.in – to enable investors to trade on its platform from anywhere in the world.

The exchange also tied up with US’ top stock exchange, the NYSE Euronext, to cater to the demand for high-speed trading, low latency data feeds, co-location and other services supporting automated trading.

Competition not far behind
BSE’s rival, the National Stock Exchange (NSE), operates its own network of PoPs in all metro cities and even in remote areas like Rajkot, Kochi and Jaipur. Both the exchanges are swiftly upgrading their technology to combat competition.

Recently, the NSE had cut PoP charges in small cities from '2.5 lakh to '1 lakh. This was way cheaper than the '18 lakh that brokers had to incur on leased line connections while connecting to the exchange in Mumbai.

Both the NSE and BSE upgraded to global standards for electronic order messages, or FIX (Financial Information exchange), protocol. This helps in orders stemming from technology-driven practices, like algorithmic trading.

Market players say over 75 per cent of buy-side and 80 per cent of sell-side firms currently use FIX for electronic trading globally, and its usage could rise to over 95 per cent over the next few years.