Thursday August 11 2016

News Source: Global Exchanges

Focus: Trading Rules

Type: General




The Securities Exchange Board of India (SEBI) has proposed strengthening of the regulatory framework for algorithmic trading & co-location.

Objective

The objective of the proposal is to seek comments and inputs from all stakeholders, including Investors, Market Infrastructure Institutions (MIIs), and Intermediaries, to explore and address concerns relating to market quality, market integrity and fairness due to increased usage of Algorithmic Trading & Co-location in Indian securities market.

Background

Algorithmic trading is a step-by-step instruction for trading actions taken by automated computer systems. Typically, trading algorithms enable the traders to automate the process of taking trading decisions based on the pre-set rules / strategies. Market participants, both clients and propriety trading by brokers; have adopted algorithmic trading as it provides speed, control and anonymity to the end-user.

High Frequency Trading (HFT) is a subset of algorithmic trading that comprises latency-sensitive trading strategies and deploys technology including high speed networks, colocation, etc. to connect and trade on the trading platform.

Adoption of such advancements in technology in  the market in recent years has resulted in vast majority of orders being generated through trading algorithms.

Proposal

SEBI is examining various options to allay the fear and concern of unfair and inequitable access to the trading systems of the exchanges. In this regard, it has decided to consult market participants and seek their views on the efficacy and need to introduce the following mechanisms in the markets.

  • Minimum Resting Time for Orders
  • Frequent Batch Auctions
  • Random Speed Bumps or delays in order processing / matching
  • Randomization of orders received during a period (say 1-2 seconds)
  • Maximum order message-to-trade ratio requirement
  • Separate queues for colo orders and non-colo orders (2 queues)
  • Review of Tick-by-Tick data feed

The comments may be sent latest by August 31, 2016 to mrddop@sebi.gov.in or by post to SEBI

Click on the link above for further details