SEBI proposes new framework for algo trading, co-location, Good news for retail participants and importantly retail day traders

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.

ANOTHER COSMETIC STEP: SEBI ALLOWS ‘CREATIVITY AND INNOVATION’ IN IPO ADVERTISEMENTS

SEBI ALLOWS ‘CREATIVITY AND INNOVATION’ IN IPO ADVERTISEMENTS

In an attempt to liven up the primary stock market, the market regulator SEBI has decided to allow companies to use creativity and innovative advertisements, of course with the necessary disclosures and information as mandated.

Since, the 2010 Coal India IPO, there has been not meaningful IPO in Indian markets. The primary market has been languishing; no wonder why it is so; as the secondary market is also in doldrums amidst the exodus of retail investors. It has been the foreign institutional investors who have been holding the market at near lifetime highs and keep it going; is a harsh fact of the time.

The Indian IPO market has been sluggish for almost three years and IPO proposals worth Rs 72,000 crore are yet to hit the market despite having got regulatory clearance.

Among various reforms, Sebi has introduced an e-IPO mechanism through which investments can be done online without signing any physical documents. This has helped fast-track the public offer processing time. 

On account of streamlining of process and other external factors, the average time taken for processing offer documents has also come down from 152 days to 48 days.

Besides, a facility to procure and submit IPO forms is now available to investors in more than 1,000 locations, as SEBI has allowed use of stock broker network of stock exchanges for submitting applications. 

The investors are also now directly able to submit ASBA (Amount Supported by Blocked Amount) applications in more than 67,000 bank branches as against less than 10,000 branches that existed earlier.

SEBI changes norms for FII and Buyback of Shares

Sebi, India’s capital market regulator on Tuesday tightened the norms for share buybacks, moving to arrest suspected misuse of stock repurchases by listed companies in recent years.

Companies would have to ensure they spend at least 50% of the money earmarked for buybacks, the Securities and Exchange Board of India (Sebi) said after a board meeting. That doubles the current minimum of 25%.

Sebi’s new rules will require companies opting to buy back shares to create an escrow account in which they would need to keep at least 25% of the amount earmarked for the repurchases.

Should they fail to meet the 50% target, they would forfeit a sum equivalent to 2.5% of the amount allotted for the buybacks.

In a buyback, a company repurchases shares from securities holders, employees or on the open market, primarily to return surplus cash to shareholders, support the stock price during market weakness, or increase the value of underlying shares.

On 2 January, Sebi issued a discussion paper on tightening buyback norms to prevent misuse of the route.

Of the 75 buybacks through open market purchases in the three financial years to 2010, companies spent an average 49.91% of the money they had allocated. According to Mint research in January, during 2011 and 2012, out of 54 buyback announcements by listed firms, only 18 actually took place.

Typically, when a company announces a share buyback, investors tend to push up its stock to get a higher price. Sebi suspected that some companies were announcing share repurchases merely to push up their market value.

Minimum Public Float stipulation, 190 companies still don’t care SEBI

Minimum Public Float stipulation, 190 companies still don’t care SEBI;

The information was provided by  Corporate Affairs Minister Sachin Pilot in Lok Sabha in a written reply of a question asked to him.
According to Sebi, companies could meet the norms by many routes including Offer for Sale, Institutional Placement Programme, bonus and rights issues to public shareholders.In a circular issued in August 2012, the market regulator had said that companies seeking to achieve MPS by ways, other than prescribed, could approach it.
The answer also noted that It is also mentioned in the circular that listed entities desirous of seeking any relaxation from the available methods may approach Sebi with appropriate details. So we can confer that there will be more extensions to many companies in specific or another extension to deadline in general for the MPS stipulatin.

The SEBI stretched the minimum public float requirement for listed firms one year in 2012 for their convenience till June 2013. But it looks after two years of extension of limit, still many companies don’t care about it.

As on December, 2012 at total of 190 companies, including 14 PSUs, are yet to meet this minimum prescribed public shareholding norms. As on that date these stake was worth Rs.30,000 crore.  Sebi has also initiated consultations with non-compliant companies to resolve all outstanding issues for ensuring adherence to this requirement. But it is highly contemptuous as the market condition of debt as well as equity does not seem to be very good for a fund raising or stake dilution even environment.