algo trading India, Automated trading India, Algo trading BSE NSE
SEBI
proposes new framework for algo trading, co-location =
To stop inequitable
trading access to the exchanges, markets regulator Sebi today proposed a new
framework for super-fast algorithmic trading and co-location facility,
including by suggesting 'speed bumps' and separate queues for algo and non-algo
trades.
To stop
inequitable trading access to the exchanges, markets regulator SEBI today
proposed a new framework for super-fast algorithmic trading and co-location
facility, including by suggesting 'speed bumps' and separate queues for algo
and non-algo trades.
Algorithmic trading or 'algo' in market parlance refers to
orders generated at a super-fast speed by use of advanced mathematical models
that involve automated execution of trade, while co-location involves setting
up servers on the exchange premises.
The Securities and Exchange Board of India
(SEBI) has proposed to introduce resting time for order, random delays and
random speed bumps, separate queues for co-location and non-co-location orders
for strengthening the regulatory framework for algo trading and Co-location
facility.
The regulators across the world are looking to find an effective
solution for this. SEBI has sought public comments on the proposal till August
31 and final guidelines would be put in place after taking into account views
of all the stakeholders.
The speed bump mechanism involves introduction of
randomised order processing delay of few milliseconds to orders.
The move is
expected "to discourage latency sensitive strategies as such delays would
affect HFT (High Frequency Trade) but would not deter non-algo order flow for
which delay in milliseconds is insignificant," SEBI said in a discussion
paper. "The intent behind such mechanism is to nullify the latency
advantage of co-located players to a large extent," it added.
The
regulator also plans to begin minimum resting time mechanism, wherein orders
received by the stock exchange would not be allowed to be amended or cancelled
before a specified amount of time -- 500 milliseconds is elapsed.
Besides, it
plans to eliminate 'fleeting orders' or orders that appear and then disappear
within a short period of time.
The regulator has proposed introduce separate
queues and order-validation mechanism for co-lo orders and non-colo orders.
"Orders from queues will be taken up in the order-book in round-robin
fashion... the co-located participants would still be among the first to
receive the market data feeds due to their proximity to the trading platforms
of the exchange and this coupled with the capability to make trading decisions
in fraction of seconds would still provide the co-located participants the
ability to quickly react to such market data," SEBI noted.
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