India’s Delhi Stock Exchange (DSE) plans to reopen in October, with a planned daily trading volume of about $105,000, the exchange announced yesterday.

The exchange, which was incorporated in 1947, closed in 2002. The market once connected fifty cities, but became a victim of technological progress. Computerized trading introduced by a new National Stock Exchange began to trump both the Delhi and Mumbai exchanges 15 years ago.

“The Delhi Stock Exchange had stopped functioning as it was doing very little business at the time. Due to the introduction of computerized trading by the then-new National Stock Exchange in 1994, which was also adopted by Bombay Stock Exchange (BSE), it became difficult for regional exchanges such as DSE to compete,” said Anshuman Jaswal, an India-based analyst at Boston-based research company Celent.

“The regional exchanges in some of these cities such as Delhi, Kolkata and Ludhiana began to struggle as the best brokers took their business to NSE. The comfort of trading on an electronic exchange such as NSE also meant that the brokers’ customers preferred to trade with the electronic exchange, as opposed to those with the earlier open outcry system,” Jaswal said.

To catch up with the times, the DSE signed an agreement with IBM in July under which IBM will provide information technology services, including business continuity and disaster recovery services on a pay-as-you-go, or operational expenditure model, under which the exchange will avoid having to incur large up-front capital expenditures.

“The fact that the DSE partnered with IBM to help it launch its operations after seven years established the trust clients put in IBM and its capabilities,” Goldie Srivastava, a corporate communication officer at IBM’s Bangalore office.

IBM will also provide round-the-clock monitoring services, the companies announced.

The ten-year agreement is worth 110 million rupees (US $2.3 million).

Before allowing the exchange to re-open, India’s regulators required that “stringent guidelines” be met, and that there were backup plans in place, in case of a disaster, to keep the exchange open.

The exchange’s data operations will be highly secure and the exchange has set a goal of “zero data loss” once it becomes operational later this year, Srivastava said.

IBM will manage the data center, providing services on a “pay as you go” basis. This “was also one of the key reason why DSE decided to choose IBM for this strategic relationship,” Vijay Gupta, chairman of the DSE’s business development committee in DSE said in a statement.

The new technology alone, while it will help meet regulatory requirements for disaster and recovery, will probably not be enough to allow the DSE to regain its earlier market position, said Celent’s Jaswal.

“The leading exchange in India over the last hundred years, the Bombay Stock Exchange, has also struggled to overcome the technological advantage of the National Stock Exchange,” he said. “Exchanges such as the DSE will find it very difficult to create a market for themselves, even at a regional level, as technology has removed the need for regional exchanges.”

The exchange would do well to focus on other niches, instead, he suggested.

“Worldwide, exchanges for small and medium enterprises are doing very well,” he said.

Today, the DSE lists 2,800 companies – 1,800 of those being exclusive listings. Trading is currently handled by the Bombay Stock Exchange.