Linux stars in Mission Critical
Linux is growing out of Unix's shadow and handling
mission-critical tasks on its own. Check out its role at the NSE
THE National Stock Exchange (NSE) was one of the first exchanges
in the country to introduce instruments such as derivatives (which are similar
to equity) where you trade in futures and options.
NSE had a Unix-based system in place for equity trading, but felt the need for
a more cost-effective risk management solution for its derivatives segment.
The team working on the project had to consider various issues. Real-time throughput
was required to analyse trade risk factors. The team also had to ensure that
the system wouldn't collapse under high loads. Linear scalability was another
Says G M Shenoy, senior vice president of NSE.IT, "NSE was looking at large
amounts of computation. There were more than 1,000 trading members and over
200 clearing members. Initially we were looking at around 50 trades per second,
which would mean 100 value at risk (VAR-a term for risk analysis that has been
defined and approved by economists) computations/second. Parallelism was the
A Linux cluster
After considering various options, it was decided to go for
a Linux cluster computing solution, initially on an experimental basis.
The development team decided to use a cluster of inexpensive Linux-based machines
powered by Intel processors, and use MPIS (message passing interface standard)
for clustering infrastructure, with a switched Ethernet 100 Mbps network. It
was decided to use multiprocessor hardware to handle non-parallel components
such as data sharing.
During this experimental period, R&D was conducted on the platform to ascertain
the robustness of the system and to demonstrate the use of Linux for a real
business application requiring high-level floating point computations at high
The concept worked. From there on it was a matter of fine-tuning and putting
it into production.
The answer is Prism
NSE had deployed SuSe Linux, but later on moved to RedHat Linux 7.2 as it was
more ubiquitous. Explains Shenoy, "Plenty of information was available
on the Internet with reference to Red Hat Linux, which was not the case with
other Linux packages. Also, it was easier to get drivers for Red Hat Linux.
Another factor that went in favour of Red Hat was that it was easier to get
The system NSE set up for doing VAR calculations has been christened Prism (parallel
risk management system). Prism consists of a centralised mother machine that
is in turn connected to a number of child machines.
The mother, a dual-CPU Intel Xeon 1 GHz server, which runs Red Hat Linux 7.2,
receives the trade information. The trading positions and margins of all the
members are maintained in the memory of the mother machine, which is fault-tolerant.
All the computations that take place on the mother machine are copied onto another
machine. This ensures data recovery in case of a breakdown or disaster.
Information is distributed by the mother machine to the child machines. The
child machines are single-CPU Intel PIII 800 MHz workstations. These machines
do the margin computation, which is then sent back to the mother. Currently
there are five child machines, but NSE plans to scale up once trade volumes
go up. The Linux children need no management; only the IP address has to be
configured to install a replacement child.
Two important aspects of the derivatives segment are clearing and settlements,
and risk management. The risk management system at NSE enables online risk and
position monitoring of members. The system, developed by NSE.IT, sends out alerts
to the trading system and risk management team, and if a broker goes past his
acceptable risk limits, his account is disabled in real-time. For instance,
if one trade crosses the limit, the next trade a second later will be automatically
rejected. Thus, NSE's risk management system plays a critical role by nipping
the possibility of a default in
Cost-effective and robust
Prism cost NSE around Rs 15-20 lakh. The savings have been
substantial when compared to the cost of setting up a Unix-based system, where
the cost of acquiring the mother machine itself would have been more than Rs
The current system can be scaled up to 1,000 trades/second. The software development
has already been done, and the hardware costs are trivial. According to Shenoy,
it has been possible to keep the costs so low only because of the Linux-based
Very few exchanges in the world are said to have a robust and cost-effective
system like the one developed by NSE. Indeed, Prism is a system that can be
replicated by other exchanges in the country, even in the capital markets, and
also to drive up volumes in the derivatives segment.
An interesting sidelight in this effort is the fact that Prism was developed
by NSE.IT, a spin-off company that consists of the in-house IT team that had
worked on NSE's core systems. Thanks to this proactive initiative, NSE is today
counted among the top five exchanges in the world in terms of volumes traded.