The share of algorithmic trading expanded from 17 per cent in FY11 to 49 per cent in FY20 and further to 54 per cent in FY25.
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PAUL NORONHA

The share of colocation (Colo) and direct market access (DMA) facilities in equity cash trading on the NSE reached new highs in FY25, at 36 per cent and 7 per cent, respectively. This is on the back of growing participation of proprietary traders, who mostly use the colo facility for high-frequency trading. Institutional investors primarily rely on DMA for direct access to the market.

The turnover via DMA has grown at a CAGR of 83 per cent over the last five years, while turnover through Colo facilities registered a CAGR of 29 per cent during the same period.

The share of mobile trading increased to 21 per cent in FY25 — the highest in the past four years. Mobile emerged as the third most preferred channel for equity cash segment. Over the last five years, turnover through mobile platforms has grown at a CAGR of 36 per cent.

For the first time in FY25, algorithmic trading overtook non-algo trading in the equity cash market segment. The share of algorithmic trading expanded from 17 per cent in FY11 to 49 per cent in FY20 and further to 54 per cent in FY25. The share of non-algorithmic trading declined from 83 per cent in FY11 to 46 per cent in FY25.

Derivatives trends

In FY25, the share of Colo and DMA in the equity futures instruments surged to record highs, reaching 50 per cent and 16 per cent respectively. This trend mirrors developments in the equity cash segment and highlights the growing role of proprietary traders and institutional investors, particularly foreign investors, who majorly rely on DMA.

This technological shift has coincided with a decline in the share of internet-based trading and CTCL/NEAT terminals, while the share of mobile trading remained broadly flat. However, within equity options, mobile trading surged to 24 per cent in FY25 — its highest level ever — highlighting technology as the enabler for trading.

Despite the increasing diversity in access modes, colo remained the dominant force in driving turnover across equity derivatives. The share of colo has increased over the years from 11.5 per cent in FY11 to 61.5 per cent in FY25 for equity derivatives, based on notional turnover. In contrast, CTCL/Neat terminal, which dominated until FY14, witnessed a steep decline — from 75.6 per cent in FY11 to just 6.4 per cent in FY25, marking its lowest share since inception.

Algorithmic trading’s share has risen from 16 per cent in FY11 to 70 per cent in FY25. The growth has been particularly strong in stock futures, stock options and index options, where algo trading now accounts for 72 per cent, 68 per cent and 62 per cent, respectively. This shift reflects the increasing adoption of technology-driven strategies for speed and efficiency.

Published on April 30, 2025