Smart order routing gains traction, but overall adoption remains low

Colocation gains further ground in cash trading with 44% value share

Smart order routing (SOR) — a facility that automatically directs trade orders to the most favourable venue based on price and liquidity — has gained traction over the past year, though overall adoption remains low. 

SOR’s share in traded value on the National Stock Exchange of India’s (NSE’s) cash segment rose to over 3.3 per cent in March 2026, up from 0.7 per cent a year earlier, according to NSE Market Pulse data.

 

On BSE, the figure stood at 2.94 per cent at the end of March 2026, compared with 1.72 per cent in March 2025. In contrast, SOR usage in equity derivatives remains negligible, with turnover continuing at zero, according to an NSE report.

 

Colocation continues to dominate trading activity, accounting for over 44 per cent of traded value in the cash segment in March 2026, compared with 38.3 per cent a year earlier. Mobile trading also gained ground, rising to 20.1 per cent during the month. On an annual basis, colocation’s share climbed to a record 39.4 per cent, while mobile trading rose to a five-year high of 21.4 per cent.

 

In equity options (premium-based), colocation’s share edged up 14 basis points (bps) year-on-year to 53.4 per cent, while mobile trading saw a sharp increase of 334 bps to 27.3 per cent. Market participants credited the slow uptake of SOR to stringent regulatory safeguards, which mandate a comprehensive audit of brokers’ routing algorithms to ensure they do not introduce market instability.

 

Each application undergoes extensive pre-trade risk checks, mock testing, and system audits, resulting in longer approval timelines, brokers said. “Brokers must demonstrate a fully functional alternative trading mode in case SOR fails, in line with updated resiliency standards. Given that SOR links the order books of multiple exchanges, even a single technical error could propagate across markets. The regulator’s calibrated, risk-averse filtration process is therefore aimed at protecting systemic integrity. We have seen similar phases earlier, and this is a temporary phenomenon as systems and approvals gradually align,” said Ankur Jhaveri, managing director and chief executive officer of institutional equities at JM Financial Institutional Securities.

 

While several brokers have secured approvals, many others are still awaiting clearance from exchanges, sources said.