In a year marked by record surges in Indian stocks and turnover at the world’s largest derivatives exchange, colocation has emerged as the most popular trading method across multiple markets.
Colocation trading has steadily increased in popularity since 2011 and has become the dominant trading mode in equity derivatives and capital markets. This practice involves placing computers as close to the exchange as possible to minimize latency and execution delays for trading orders.
The share of revenue from colocation in the capital markets segment slowed last year from a peak of 34.8% in FY22, but recovered slightly in FY24, according to an NSE report. Meanwhile, in the equity derivatives sector, colocation reached a record high share of 61.6%, an increase of 241 basis points year-on-year.
The report highlights significant changes in trading modes across various segments of the NSE over the past two decades.
As shown in the report, colocation is primarily used by proprietary traders and continues to dominate participation across multiple market segments, including equity derivatives, currency derivatives, and spot markets.
A proprietary trader, often referred to as a prop trader, is a professional trader whose purpose is to leverage a company’s capital to trade across asset classes, such as stocks, currencies, and commodities, to generate profits and to share those profits with the company. I am a trader.
In an emerging trend, Direct Market Access (DMA) mode has witnessed growth over the past two financial years, reaching the highest level in 23 years at 5.8% in the spot market segment. However, the company’s share in the equity derivatives sector has declined slightly every year since FY2020.
A proprietary trader, or prop trader, is a professional trader who trades across asset classes and financial instruments such as stocks, currencies, and commodities, uses a company’s capital to generate profits, and shares the profits with the company. .
