How India’s National Stock Exchange Builds Its Critical IT Infrastructure

Technology leaders are often drawn into addressing the quintessential organizational needs of reliability, availability, scalability, and security, among other critical features in their IT infrastructure and applications. While these challenges are prevalent across various industries, evolving business imperatives can shift the emphasis on industry-specific requirements. India’s National Stock Exchange (NSE) is an interesting example of this: It uses information technology to deliver services that meet both stringent regulatory standards as well as investor needs. And if you’re building for India, these needs require remarkable efficiency and scale.

What Is The NSE?

The NSE is one of the world’s largest stock exchanges. It is based in India and also runs India’s largest trading platform. It is globally number one in terms of derivative contracts traded for the last five consecutive years (link contains downloadable Excel spreadsheet). According to the World Federation of Exchanges, NSE ranks third globally in equity segment by volume of trades. Very recently, it set a world record in terms of the number of transactions in a single day.

Since its inception in 1994, the market capitalization for companies listed on the NSE has increased 100 times to a staggering USD$4.6 trillion. NSE has built a highly versatile trading hub with a world-leading multi-asset class exchange and has always prided itself on investing in tech ahead of time. For example, it introduced APIs over two decades ago when no one even talked about them. Likewise, it implemented a T+1 settlement cycle across all sectors without the need for prefunding. In comparison, T+2 is the norm across the globe, barring limited T+1 segments in China that require prefunding. Now, it’s aiming to offer same-day settlement and in early 2024 had already achieved T+0 cycle for a few select stocks.

Technology Leadership Is Key

NSE’s business leadership necessitates investments in advanced technology to operate its systems and maintain their modernity. I recently had the opportunity to speak with Sampath Manickam, the chief technology officer of technology infrastructure at NSE. Our discussion began with the topic of technical debt and strategies for its effective management and very quickly evolved into an exploration of NSE’s dynamic requirements, its state-of-the-art infrastructure, and its pursuit of a high-performance IT strategy. Sampath remarked, “Capital markets in India are distinctive, and NSE is in a league of its own.” After speaking to Sampath, I concur with him, and I’m confident that you will, too, once you read the following.

Unique Business Needs

NSE’s IT strategy must enable its highly complex and critical business. To that end, it must stay at the forefront of technological innovation and needs a highly robust technology infrastructure. Its business and regulatory demands are unique in many ways:

1. Unmatched availability. NSE must offer an uninterrupted service, ensuring zero downtime during trading hours to prevent financial losses. It has built its core trading systems on fault-tolerant architectures, allowing them to operate at five-9s availability or higher. The exchange employs extensive redundancy at every layer of its technology stack. For example, it has a 4:1 ratio for critical telecom links for persistent connectivity.
2. Ultra-low latency. NSE’s operations demand near-zero latency, with latency measured in microseconds. In a stark contrast, other industries typically measure it in milliseconds. NSE’s systems must process millions of transactions per second. It has fine-tuned them for rapid response, with some of the component clocking nanosecond latencies.
3. Resilient operations. NSE’s resilience must extend beyond standard disaster-recovery (DR) practices. It has to maintain performance parity even if the primary data center (DC) fails. It supports a switch-over time of less than 45 minutes. Additionally, it utilizes a SaaS-based trading platform to allow it to continue and settle trades, and regulations demand that this trading platform run in the DC of (hold your breath) BSE, the other major exchange within India.
4. Scalability. NSE has to be adept at handling fluctuating loads. These can vary throughout the day, month, and or any day in the quarter or year based on the market event. It has primed its infra for sudden market shifts triggered by major events. It maintains a design capacity at 1.5 times the peak load at any given point in time. It monitors its system loads in real time and has pegged its capacity at a level based on the global maxima (i.e., the peak of the peaks).

Now, most organizations typically have to meet at most one or two of these needs at various points but not NSE, which must meet all of the above stringent resiliency, scalability, availability, and latency requirements at all times, and it has to do all this in a highly regulated environment. For example, cloud has resolved many similar challenges, but it is not yet a viable option for the exchange. NASDAQ recently implemented AWS (Amazon Web Services) Outposts for one of its options trading platforms and was able to achieve low-two-digit-microsecond latency. NSE has to achieve an even lower latency, utilizing an in-house DC, DR, and network detection and response (NDR) setup.

How Does NSE Do It?

To plan, build, and manage its IT infrastructure, NSE adheres to certain design principles and best practices that can serve as lessons for anyone with similar needs. I have outlined a few of them below:

1. Proactive modernization. NSE’s technology infrastructure teams are relentless in their pursuit of excellence. They are continuously modernizing and optimizing their systems to stay ahead of the curve. The team meticulously monitors the load every minute, hour, day, week, and month, ensuring that the system is able to handle peak demands. This ongoing process includes adding capacity, rigorous load testing, fine-tuning, and systematic upgrades to ensure unparalleled scale and capacity.
2. Architectural mastery. At the heart of the exchange’s operations are its homegrown applications, crafted by their expert application teams for ultra-low latency. These bespoke solutions offer significant architectural control and seamlessly integrate with the hardware layer to minimize overhead and achieve the critical low-latency thresholds essential for trading operations.
3. Latency innovation. The quest for even lower latency is relentless. NSE is constantly scouting for cutting-edge technologies and novel approaches to shave off precious microseconds, striving for the fastest transaction speeds in the financial world.
4. Infrastructure-as-Code (IaC). Embracing the future, NSE embarked on its IaC journey a year ago and has already reached the halfway mark. Today, most of its infrastructure is “software-provisioned” and “configurable.” IaC significantly reduces the need for manual hardware configurations and propels NSE toward a more agile and responsive technological ecosystem.
5. Advanced automation. Automation is the cornerstone of NSE’s operational efficiency. It encompasses everything from DC to DR switch-over, system patching, server provisioning, and storage lifecycle management across three data centers to workflow automation. NSE is also looking at applying AI into both application releases and firewall management to make automation ubiquitous. Extensive automation ensures that the DR and NDR remain in perfect sync with the primary DC, courtesy of automated configuration drift analysis. This comprehensive automation strategy empowers NSE to enhance its infrastructure capacity rapidly and impeccably, thereby reducing manual intervention and the associated risks of human error.

In Summary

NSE is doing a remarkable job, isn’t it? Particularly, among other things, its capability to process 1 million transactions per second during trading hours is noteworthy. NSE has even handled a peak of over 15 billion transactions in a single day. For context, Google handles approximately 100,000 searches per second. While it is not a direct comparison, it still highlights NSE’s undeniably impressive processing power.

It was a fun and an enlightening experience to speak to Sampath. The great work that he and his team at NSE are doing is clearly worth sharing. I am excited to share such inspiring dialogues more often with you on this platform. If you have a similarly compelling story, please feel free to reach out to me.