Props pump up derivatives volume; retail falls behind
₹12 lakh to colocate a (full rack) server in its data centre, plus connectivity charges and taxes. The exchange started the colocation facility in 2009 so that brokers located in, say, Mumbai and Chennai would get data feeds at the same time, despite the Mumbai broker being closer to the exchange’s servers. Interestingly, exchange data shows that colocation-based trades accounted for 60.7% of gross turnover in April-December 2023, up 247 basis points (bps) from a year earlier, followed by mobile-based trade at 17.6% (up 22 bps), Internet-based trades at 8.9% (down 106 bps) and algo trades 1.1% (up 45 bps).
A basis point is one-hundredth of a percentage point. Prop was the only category whose market share on NSE—the world’s largest derivatives exchange by contracts—has risen in the current fiscal year through December. Their share of gross turnover surged to 59.5% in April-December 2023, up a whopping 783 bps from a year ago.
Individual or retail investors’ market share dipped by 163 bps to 26.8%, according to NSE data. The share of foreign portfolio investors, corporates and others (partnership firms, trusts, societies, etc.) declined while the share of domestic institutional investors (mutual funds, insurance and banks) remained steady, the data shows. Gross turnover (buy side plus sell side) stood at ₹110,510 trillion in FY24 (April-December) against ₹76,446 trillion in FY23.
The turnover is calculated using the notional turnover of index options, the most popular derivatives instrument on NSE. “Quick decision-making and speed of execution are keys to success in the derivatives space," said Rajesh Palviya, senior vice-president, Axis Securities. “Thanks to colocation and discretionary automated trading platforms
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