After clocking a record trading speed of six micro seconds, leading stock exchange BSE is aiming for a much faster speed of 200 nano seconds for the trades executed on its platform, in the next three years.
Earlier this month, BSE had said it has became the world's fastest stock exchange clocking a median trade speed of six micro seconds. "We are now having a target of going for 200 nano seconds to be achieved in next three years," BSE CIO Kersi Tavadia said.
"We give time stamp (for trade execution) in nano seconds today in hope to achieve our next target," Tavadia added. Tavadia said BSE has been working and experimenting on many advanced technologies including FPGA (field-programmable gate array) which would help increase the speed of trades.
According to Tavadia, to log in a speed of six micro seconds as well as better results in future, BSE had to come out of its old data centre and old network. "Our network took 3 years to change completely without any user facing any hardship," Tavadia said. BSE's new data centre went live on September 25 this year. The exchange is presently in the process of shifting the servers to new data centre over next few weeks. "Once the data centre is fully operational, we will have additional confidence to achieve even higher goals. HP has helped set up the new state-of-the-art data centre in a record time of 90 days," Tavadia said.
While BSE's system is currently receiving 50,000 orders per second with ability to handle 5 lakh orders per second, Tavadia said the same would increase manifold without losing on response time "within a few months and at a very low cost". BSE has made changes at every level, including hardware, software applications and database to look at reliability with respect to high speeds.
BSE proposes replacement of STT with LTCG
To check tax evasion and attract more retail investors to stock markets, top exchange BSE has proposed that the Securities Transaction Tax (STT) should be substituted by Long Term Capital Gains Tax (LTCG) on equities.
This would also help the government get more tax revenues as the overall STT collection (about Rs 21,000 crore in last four years) is far below the quantum of suspected tax evasion.
"If STT is substituted by LTCG on equities, government would get more revenue, misuse of the tax incentive curbed and retail investors would come back to market," BSE has said in a a presentation to the Finance Ministry.
In last four years, BSE and NSE had collected STT to the tune of Rs 21,090 crore, while the suspected tax evasion by misuse of incentives available in stock market is estimated at about Rs 20,000 crore in just a one-year period. The capital gains needs to paid on profits made by an investor. But, the LTCG in stock market is nil if the investment is held for more than a year.
The STT on the other hand is payable on all sale and purchase transactions of the securities. In the STT structure, apart from paying the tax twice, an investor has to shell out money irrespective of profit or loss on the trade.
However, this structure is often misused by those looking to evade taxes as they sell the shares through stock market by paying the small amount of STT and get the full benefit of exemption from the LTCG tax. The STT was introduced in Finance Act, 2004. At that time, this marginal tax regime was brought in to boost capital raising through primary market issuances.