Skip to main content

SEBI may impose restrictions on algo trade

Image
By
SEBI may impose restrictions on algo trade 
The Securities and Exchange Board of India (Sebi) is planning to impose restrictions on algorithmic trading by introducing a congestion charge for a prescribed slab that will be levied on traders. The move is aimed at ensuring that algorithmic trading doesn’t give market participants an unfair advantage over those with no access to such technology. 
The proposal was discussed last week by the regulator’s Secondary Market Advisory Committee. If the curbs are implemented, Sebi will be the among the first to do so globally. In 2016, the regulator had proposed the introduction of maximum order message-to-trade ratio requirements among several other proposals. 
A maximum order-to-trade ratio requires a market participant to execute at least one trade for a set number of order messages sent to a trading venue. The mechanism is expected to increase the likelihood of a viewed quote being available to trade and reduce hyperactive orderbook participation. 
Apart from order-to-trade ratio, the regulator had proposed six other measures including minimum resting time for orders, speed bumps to delay order matching, randomisation of orders and review of tick-by-tick data among others to reduce velocity. Algorithmic trading constitutes more than 50 per cent of the total in the cash and derivatives segments in India. The equivalent ratio in developed markets like the US and UK is more than 85 per cent, experts said. 
"If you put some charge, then order-to-trade ratio will increase and there will be less burden on the system,” said a person familiar with the development. Traders are said to regularly place large orders and then cancel them, putting a burden on the system. This also obstructs price discovery and denies access to small investors. In many cases, such unexecuted orders are massive in number while actual trades are very low. 
Currently, more than 80 per cent of the orders placed on most exchangetraded products are generated by algorithms and such orders contribute to approximately 40 per cent of the trades on the exchanges, Sebi has said. The Sebi panel on the secondary market, which is headed by Indian Institute of Management-Ahmedabad professor JR Varma, also discussed the interoperability of clearing corporations and having client-level settlement of collateral securities and funds. 
“In the cash market, there is no client-level settlement of securities and funds. There is a suggestion that investors’ interest should be protected if the broker goes bust,” said one of the persons cited above said. 
The Economic Times, New Delhi, 13th March 2018

Comments

Post a Comment

Popular posts from this blog

RBI rushes in to prop up falling rupee

By
RBI rushes in to prop up falling rupee India’s central bank reportedly intervened in the currency markets on Monday to prevent a further slide in the local unit, which breached the 67 mark to a dollar for the first time in 15 months amid a widening trade gap and runaway import bills fuelled by high crude-oil prices. Some state-owned banks were seen selling dollars aggressively, interventions that market dealers attributed to the central bank’s strategy to stem the decline of the Indian rupee against the US currency. The rupee is the worst performing among a dozen Asian monetary units in the past three months. It lost 4.25 per cent to the dollar during the period, show data from Bloomberg. On Monday, the Reserve Bank of India (RBI) is said to have sold about Rs 800 million collectively on the spot and exchange traded futures markets, dealers said. An email sent to RBI remained unanswered until the publication of this report. The currency market has seen such a strong central bank interven…
Post a Comment
Read more

GST Refund of Rs 20,000 Cr Pending: Exporters’ Body

By
GST Refund of Rs  20,000 Cr Pending: Exporters’ Body Refund of over Rs 20,000 crore on account of Goods and Services Tax (GST) is pending with the government with more than half the amount stuck as input tax credit, Federation of Indian Export Organisations said on Tuesday. While claims over Rs7,000 crore were cleared in March, the amount was Rs 1,000 crore in April.However, after exporters’ request, the GST council and tax department are organizing a second phase of Special Refund Fortnight starting May 31, which will enable exporters to draw their refunds at a speedy pace. Many exporters have been unable to file the refund of input tax credit due to technical glitches, exports and claim happened in different months. The major challenge lies on ITC refund especially because the process is partly electronic and partly manual which is cumbersome and add to the transaction cost, the exporters’ body said. On IGST, refunds are getting delayed due to airline and shipping companies not submitt…
2 comments
Read more

Shrinking footprints of foreign banks in India

By
Shrinking footprints of foreign banks in India Foreign banks are increasingly shrinking their presence in India and are also becoming more conservative than private and public sector counterparts. While many of them have sold some of their businesses in India as part of their global strategy, some are trying to keep their core expertise intact. Others are branching out to newer areas to continue business momentum.For example, HSBC and Barclays Bank in India have got out of the retail business, whereas corporate-focused Standard Chartered Bank is now trying to increase its focus on retail “Building a retail franchise is a huge exercise and takes a long time. You cannot afford to lose it,” said Shashank Joshi, Bank of Tokyo-Mitsubishi UFJ’s India head.According to the Reserve Bank of India (RBI) data, foreign banks’ combined loan book shrunk nearly 10 per cent from Rs 3.78 trillion in fiscal 2015-16 to Rs 3.42 trillion last financial year. The banking industry, which includes foreign banks…
Post a Comment
Read more