NSE to expand co-location capacity; chairman says manipulation can be flagged in real time: Report 

The National Stock Exchange of India Ltd (NSE) is planning a significant expansion of its co-location infrastructure as high-frequency trading and algorithmic activity continue to grow, Moneycontrol reported. The recently listed exchange plans to more than double its co-location capacity to over 4,500 racks over the next two to three years, compared with around 2,200 racks currently in operation, said NSE Managing Director and CEO Ashishkumar Chauhan.

To accommodate the expansion, NSE has freed up space at its existing headquarters for additional data-centre infrastructure. The exchange has also secured space near its current facility from the Maharashtra government, providing room for further expansion, Chauhan told Moneycontrol.

The planned increase in capacity will require substantial investments not only in physical infrastructure but also in power and cooling systems. As newer and more powerful servers consume more electricity and generate greater amounts of heat, NSE will need to scale up its power supply and cooling infrastructure alongside the growth in co-location capacity.

The expansion comes as demand for low-latency trading infrastructure rises, driven by increasing participation in high-frequency and algorithmic trading. NSE’s investment in data-centre capacity is expected to support this growing demand and strengthen the exchange’s ability to handle higher trading volumes and technology requirements.

Meanwhile, NSE Chairman Srinivas Injeti said the exchange has adequate systems in place to detect suspicious trading activity and flag potential cases of market manipulation in real time, amid renewed scrutiny of the surveillance capabilities of stock exchanges following market regulator SEBI’s action against Jane Street.

Responding to concerns over whether exchanges can identify such activity as it occurs, Injeti said NSE is well equipped to monitor unusual trading patterns and report suspicious activity to the market regulator promptly.

He said the exchange’s surveillance framework analyses a broad range of trading activity, including multiple permutations and combinations of transactions, to identify patterns that could indicate potential manipulation.

NSE also deploys established surveillance measures, including the Additional Surveillance Measure (ASM) and Graded Surveillance Measure (GSM), to monitor securities and trading behaviour that may warrant closer scrutiny.

Injeti said there were no significant shortcomings in NSE’s ability to detect or report suspicious activity. He added that the exchange’s surveillance mechanisms were also deployed in connection with the Jane Street case.

The comments come at a time when the effectiveness of exchange-level surveillance has drawn greater attention, particularly around sophisticated trading strategies and activities involving high-frequency and algorithmic participants.