Leading stock exchanges NSE and BSE in a ‘rack race’ to ramp up co-location capacities as demand soars

The Rack Race among Exchanges

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26 Aug, 2025 12:21

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Leading stock exchanges NSE and BSE are planning to increase the number of available racks - spaces where brokers install their servers - in an effort to ramp up co-location capacities that offer faster access to the exchange trading system, as demand from market participants continues to soar over last few years.

As per the latest data, NSE has a co-location capacity of around 1,300 full racks, and the exchange intends to add 300 additional racks by the end of June. Over the next two years, NSE plans to add 2,000 more racks in a phased manner.

“We have a pipeline of participants who want racks, who have applied for racks and have been waiting for the same. The pipeline has been building up over the last several years on a consistent basis, and because we reached a point where we needed to create more racks, in fact, we have shifted our employees to a nearby building,” NSE’s Chief Business Officer Sriram Krishnan had said in a post earnings briefing on May 7.

To step up on its co-location services, NSE has moved its office to a new location within the Bandra Kurla Complex (BKC) in Mumbai, while the landmark Exchange Plaza office, also situated in BKC, is now being developed as a data centre to accommodate more racks.

During the analyst call, NSE’s CFO Ian Deouza, said, “If we were to build all the 2,000 racks, it is estimated that the cost will be around Rs 520-550 crore, but this will occur over a phased period, and it will be depreciated over the commercial life of the racks”.

BSE, Asia’s oldest exchange, too is focussing on creating more space for co-location racks. Around three years ago, a corner of the historic Rotunda Hall at the Bombay Stock Exchange in Mumbai was cordoned off to create more space for co-location racks. A leased portion on ground floor too has been taken back to create additional space for racks. Currently, BSE has 300 racks and the exchange plans to add 200 more in next 3-4-months.

During a post earnings call with analysts on May 6, BSE’s MD and CEO Sundararaman R said, “…at this point of time, this is a good number, that is around 500 racks with a mix of 15 kVA and 6 kVA, probably giving an equivalence of around 650 racks is a good number to aspire for, given the number of products we have as a profile with us”.

Industry insiders say BSE is also scouting for more real estate to accommodate co-location racks. A co-location facility allows stockbrokers to place their servers at the stock exchange for a fee, giving them access to price data a fraction of second before other participants who do not have proximity to the racks.

Both NSE and BSE have not yet replied to an email seeking comment.

The co-location facility is expected to generate revenue for exchanges if demand sustains, though exchanges see it more as a product offering than a source of revenue.

BSE’s charges for a quarter rack is Rs 3 lakh per annum, and for a half rack, the exchange charges Rs 6 lakh annually. Full racks of 6kVA costs Rs 12 lakh per year, and a 15 kVA rack can cost up to Rs 25 lakh per annum. In May last year, BSE had increased its rack charges significantly for almost all categories.

In contrast, NSE has revised its charges downwards, applicable from April 1 this year. NSE’s full rack charges were revised downwards from Rs 12 lakh to Rs 9 lakh per year, while for half rack the charges were reduced to Rs 4.50 lakh from Rs 6 lakh earlier. The quarter rack fee was cut to Rs 2.25 lakh from Rs 3 lakh earlier.

The race to add co-location racks is expected to further increase once co-location services are allowed for commodity exchanges. Currently, commodity exchanges cannot offer co-location facilities. A representation in this regard has been made to regulator, but so far, no view has been taken on the request.