Full Interview with Ashish Chauhan
CIO: Can you share your vision for BSE?
Ashish Chauhan: BSE is an Indian exchange. Our motive is to help India create wealth. Our motive is to help people who want to save, invest in ‘productive capital’—by investing in companies that require these funds. These companies will then create new jobs. India needs to create 2.5 crore jobs every year for the next 20 years. Jobs cannot be created without investment. They cannot be created by investments in real estate, gold, silver or other unproductive assets.
If you invest in the stock market you are investing in the nation’s economic growth, while benefitting yourself. BSE is a catalyst in capital formation and job creation in India. That is our vision for BSE. We want to create profitable returns for Indians and foreigners who invest in creating new jobs in India. It’s a vision for India, Indian investors, and companies investing in India.
CIO: What have you done to make the exchange global?
We are a local exchange, but, in a sense, we are global because one in every six humans stays in India. That’s a large number, so in a sense, we have a very important international role to play. BSE is one of the largest exchanges in the world by the number of companies listed. It’s the fourth largest by number of index options laid, and the fifth largest by number of trades. We are among the top exchanges in the world. In that sense we are a global exchange with a vision for India.
Since its inception, BSE has helped India create a wealth to the tune of $1.2 trillion. But the idea is to help India create $12 trillion of wealth. Today, we have 2.5 crore investors. Can we have 25 crore investors by 2030? Can we have a market cap of $12 trillion by 2030? How can we help promote long-term economic growth? How can we allow foreigners to invest in India in a way that is conducive to their investment horizons and objective? These are the questions we ask ourselves. When we are able to create an investment culture which will take the number of investors from 2.5 crore to 25 crore then our vision and objective for BSE will be met.
CIO: BSE’s legacy is something to be proud of, but it can also cause inertia.
We try to reconcile the past with the present and then move forward. There are huge benefits of having a legacy but there are also pestering issues that come with it. Being a 139-year-old institution, BSE was a low tech, floor-based bourse. It set up BOLT, its national trading platform, only in 1997.
In contrast, NSE, which was established in the mid-90’s was armed with superior, screen-based technology. NSE became the first exchange in the world with fully, electronic screen-based training. It generated good traction with investors because it created a transparent trading platform. In less than a decade, NSE entered the ranks of largest exchanges globally in terms of volumes. Its technological prowess challenged the might of BSE and weaned away trade. NSE got this advantage because it was a new institution, a blank canvas, and because it was open to experimentation and risk taking. It could afford to adopt new systems without disrupting routine trades.
CIO: How is technology changing the way BSE works?
Worldwide, exchanges want to shorten turnaround or response time (the time from when an order is placed to when it’s executed). In this business, speed is of the essence. The runner-up doesn’t get anything in the stock market. Going forward, speed and the cost of doing business will be important as automated trading may account for as much as 90-95 percent of volumes.
With this end in view, we now have the fastest trading platform in the country. The system, called BOLT Plus, has made BSE the fastest domestic equity-trading venue by slashing trade time for its members by 98 percent, from 10 milliseconds to an astounding 200 microseconds. This is 50 times faster than we used to be. In the next three years, we want to reduce it further to 20 microseconds. Then we will be 500 times faster than we were. NSE’s response time is in the range of milliseconds. A better response time could help us attract a sophisticated class of traders involved in high frequency trade.
We now have a technology that is significantly superior and has never been seen in India. It’s 50 times larger in terms of throughput, and costs only one-third.
Transactions through algorithms require larger throughput. Today, 90 percent of transactions come from algorithms. We are well-equipped to handle this. Three to four years ago, the largest number of orders in a day was a crore. Today, we get 17-18 crore orders a day. In two years, we will get 200 crore orders a day. That kind of scalability and throughput—with speeds of less than 200 microseconds—has not been seen in India. We can handle 5 lakh orders in one second with a response time of 200 microseconds.
We have also changed the network. That’s a fact that many of my own customers are not aware of because it’s taken place seamlessly. Not a single minute has been lost in trade. These are the tectonic shifts on BSE’s technology front. This transformation is reflected in our new tag line: Experience the New.
CIO: In which other areas are you making changes?
There were three areas that needed transformation: The network, products, and distribution. Our network was largely Bombay-centric, the products were old-style, and the distribution network was limited. In three years, we have a significantly large number of members trading from outside Mumbai.
On the product front, we were only an equities market. Today, we have a significant market share in equity derivatives. We are trying to shore up our product range. In the currencies market, which we launched three years ago, we have over 25 percent market share. In the SME exchange, we have over 95 percent market share. We are now a full-service exchange with a breadth of products including interest rate futures, debt trading, currency futures, SMEs, E-IPO, debt distribution, mutual fund distribution, and interest rate derivatives. In new product categories, we are able to grab more market share because of our technological superiority. And, in categories where there are entrenched players, we are able to conquer the market fast because of our technology. Our distribution network was weak. Today, we are present in 2,000 cities.
CIO: A challenge for Indian bourses is getting more people to invest in stocks. How are you tackling that?
Reach or distribution was indeed a challenge. But today, we are present in 2,000 cities. The second challenge was the cost of investment, which used to be large. But now that’s been optimized because of automation, mobile, and real-time information through TV and the Internet. That’s another issue resolved.
The third challenge are competing products in insurance, banks deposits and chitfunds. Some bad products like chitfunds are better marketed in mofussil areas where we don’t have a reach. Even banks are not doing very well in those areas. In the last few years, we've learnt that we need to be proactive about showing people the benefits of investing in financial markets.
Each asset class like gold, silver, or real estate has a cycle. First the prices go up, then they plateau or they go down. In the last 5-6 years, gold, silver and real estate have given good returns but the stock market hasn’t. So people are not investing in the stock markets. But even if gold went up five times in the last few years, it won’t always be the case. As stock markets pick up, they will woo more investors.
CIO: What is your ask of Kersi Tavadia, the CIO at BSE?
Our business is IT enabled. Technology helps us manage a hugely complex business framework. We do not have any physical product. We don’t produce anything except trust and we do that through IT.
We have to ensure that our technology frameworks keep the entire trade going. I want Kersi to ensure that the markets never stop. That is the most critical part of our business because we offer a time-critical service to our users. Second, is to continue to innovate in a way that BSE is considered a leader in the industry.
CIO: Given you're a former CIO, is it easier for Kersi to justify technology investments?
Kersi and I have known each other for a long time. Both of us have been a part of the same industry for quite some time. We understand the nuances of the financial markets and the levers of business growth. We know how to achieve technological superiority at a low cost. Both of us know how to derive value from a low-cost technology framework. Kersi knows how fast our business moves and how fast the margins are getting squeezed. Our chairman, S. Ramadorai himself, is a technology wizard. He set up TCS. All three of us have worked in technology for practically whole of our lives. We know where the shoe pinches and how to take care of it.
CIO: What career advice do you have for CIOs?
In today’s day and age, career tracks are changing rapidly. There is no single career path that is going to be available in the future. If you stay in a single role for long, your career will stagnate. You have to be ready to accept new challenges. And you have to be humble and nimble. A CIO should not think that because they have breadth in experience in IT, they should remain in IT. You can’t afford to think that way. Grab opportunities that come your way. You have to understand the levers of your business and understand what makes the business tick.
CIO: What about for CIOs looking to move to a business role?
They should start the process by taking steps to reinvent themselves within their business. They should equip themselves with cross-functional expertise, and refresh outdated perspectives that their business peers hold about their role.
They need to expose themselves to myriad areas of business. They have to wear the hat of a CEO, sales head, marketing specialist, and finance head.
Usually, CIOs have a tendency to think very technology specific. They think like technicians. They should try to add value to themselves everyday. They need to shore up their business and communication skills. They need to break out of their comfort zones and be relevant partners to the business. They need to have a strong understanding of finance. In order to stay relevant in a rapidly evolving technological landscape, CIOs should try to acquire a management degree to boost their prospects of occupying the C suite.
CIO: Has your management philosophy changed over the span of your career?
Times change. And you also evolve with each role. Each industry has its own ethos and its own success and failures. You need to understand the ‘moving’ reality. In business, there is no static reality. The stock exchange illustrates this truth. There was a time when floor-based trading used to be the king of stock markets. Floor-based trading was a 400-year technology and quite stable at that. But within a few years of automation coming into play, IT just took over and the floors became redundant. Even in the NYSE, where the floor still exists, it’s only cosmetic. Everything is automated. You might have been a great trader in 1992 but in 1996 you would have found yourself out of place because in four years things changed drastically.
Similarly, cricket used to be a game which was run by associations. And once in two or three years, a cricket match would come to a city. It was always sold out because demand exceeded supply. But we created a business that could sell 10 matches in 35 days—three hour matches at that.
Every business has its own nuances. And it changes continually. You have to adapt to the change in reality. You have to be willing to experiment and learn from others. And continue to evolve. A style that makes you successful once may not work for you all the time and in all industries.
CIO: You’re an avid cricketer. Do you really get time to play cricket these days?
Last year, I played a couple of matches but travel and work weekends generally take away a lot of enthusiasm for sports.
CIO: You also love books. What are you reading at present?
Currently, I am reading a very fascinating book called Bad Ideas by Robert Winston. It’s an arresting history of our inventions. It gives a broad education in the history of science and discovery.
Sneha Jha is principal correspondent. Send feedback on this interview to email@example.com