The broker’s trading terminal connects to the stock exchanges via leased lines. The customer connects to the broker’s trading terminal (Internet-based trading (IBT)/ Securities trading over wireless technology (STWT) over the internet. The order messages are then transmitted from the broker’s trading terminal to either exchange empanelled vendor’s Order Management servers (OMS) or in-house OMS via Internet or P2P leased lines. Further, the messages are transmitted from the vendor’s/ in-house OMS to the exchange servers via P2P leased lines or MPLS leased lines for order matching and confirmation. Most of the trading members use the vendor’s OMS for order routing. We are currently using the vendor’s OMS but are in the process of building our own OMS.
A simple architecture diagram is shown below
The connectivity between the exchange servers and the broker/ vendors OMS has evolved from dial-up connection to P2P leased lines over a period of time, as listed below.
- Dial-Up Connections: In the early days of the internet, dial-up was the primary method of connecting to the internet. It was slow, with speeds typically around 56 kilobits per second, and the connection was not always reliable.
- VSAT (Very Small Aperture Terminal): In the context of stock exchanges, VSAT technology was a significant step forward. It used satellite communication for data transmission, enabling connectivity in areas where terrestrial networks were not available. Typically, VSAT systems can support speeds from 56 kbps up to 4 Mbps. However, this is shared bandwidth, meaning the actual speed a user experiences can be much lower, especially during peak usage times. It suffered from issues like latency and limited data transmission speeds.
- P2P Leased Lines: Leased lines represented a major advancement. These are dedicated, point-to-point connections that offer higher speeds and more reliable connectivity than VSAT. Leased lines offer much higher speeds than VSAT systems, ranging from 64 Kbps to 10 Gbps or more. Because of their high bandwidth, leased lines can quickly transmit large volumes of data. They were widely adopted by stock exchanges and brokers for their operations. Leased lines have much lower latency than VSAT systems because the data does not have to be transmitted via satellite. The exact latency depends on the distance between the two points being connected, but it is generally much lower than with VSAT systems.
- MPLS (Multi-Protocol Label Switching): MPLS technology improved the efficiency of data transmission over the network by using labels for data packets, reducing latency and improving reliability. MPLS is also similar to leased line connectivity. MPLS is a protocol for efficient network traffic flow between multiple locations. It operates in a different layer of the network compared to leased lines. MPLS works on top of any networking technology, which could be a leased line, or an internet connection, or any other type of connectivity.
Point-to-Point (P2P) Leased Lines and Shared Bandwidth Internet Services are two different types of network connections with distinct characteristics:
- P2P Leased Line:
- A P2P leased line is a dedicated, private line that provides a direct connection between two points, often between two offices or between an office and a data centre.
- The bandwidth on a leased line is dedicated, meaning it is not shared with any other users. This ensures a consistent level of service, as the performance of the line is not affected by other users’ activities.
- Leased lines typically come with a Service Level Agreement (SLA) that guarantees a certain level of service, including uptime, latency, and bandwidth. This makes them suitable for businesses that require a high level of reliability and performance.
- However, leased lines are typically more expensive than shared bandwidth services, as you are paying for a dedicated line.
- Broadband Internet:
- Broadband Internet is a shared bandwidth service that, as the name suggests, involves multiple users sharing the same bandwidth. This is the typical setup for residential and many small business internet connections.
- The performance of a shared broadband service can vary depending on the activities of other users. For example, if many users are downloading large files at the same time, it can slow down the connection for everyone else.
- Shared bandwidth services typically do not come with the same level of service guarantees as leased lines. While they may advertise a certain level of bandwidth, this is usually a maximum level, and the actual bandwidth can be lower, especially during peak usage times.
- Shared bandwidth services are typically cheaper than leased lines, as the cost of the connection is spread among multiple users.
Since the trading members use either P2P leased lines or MPLS leased lines for connectivity between the OMS and the exchanges, the actual bandwidth required is much less than the bandwidth provided by broadband connections. These P2P leased lines are required for carrying out a set of fixed tasks such as sending orders and receiving confirmation, showcasing everything that is broadcast by the Stock Exchange (feeds, 5 depths, market open/close status) on the trading terminal, etc. The bandwidth required for transmission of each of these messages is listed in this circular by NSE.
Further, the range of bandwidth available on each line, which is required for running a retail stock-broking platform, varies between 2 Mbps and 45 Mbps across exchanges. The recommended capacity for connectivity to NSE, as per the circular listed above, varies between 2Mbps upto 40Mbps.
To illustrate that the bandwidth required for various tasks with P2P leased lines is much less than that which is needed by a home broadband connection, the bandwidth required for everything that is broadcast by the Stock Exchange (feeds, 5 depths, market open/close status) only consumes 600 Kbps in the Cash market segment.
Hence, the bandwidth required to carry out the fixed set of tasks expected out of a trading application requires much less bandwidth than is required for things like streaming high-definition videos, sharing high-quality pictures, etc. Also, as stated above, the functionality of a shared broadband internet vs. that of a dedicated leased line is very different, and hence, it’s unfair to compare the bandwidth provisioned for each line with the bandwidth provided by the broadband internet!!!
Trading members have multiple such setups with multiple dedicated leased lines with adequate bandwidth provisioned. There are also backup leased lines provisioned for each primary line for redundancy. We would also like to reassure you that we have multiple setups with multiple leased lines, the capacities of which are constantly monitored. As a best practice, based on the load being consumed, we also realign the line capacity once every quarter.