The move by Securities and Exchange Board of India (Sebi) to make algorithmic trading cheaper for investors while initiating stricter monitoring of such trades is going to pep up the market. The market watchdog has allowed shared co-location services for trading members and asked bourses to provide tick-by-tick data free of cost. Expressing concerns over algorithmic trades clogging the system, it has also asked them to allot a unique identifier to each of the algorithms used so that an audit trail can be analysed.
The regulator had recently proposed a review of algorithmic trading to disincentivise such trades. A year ago, it had also proposed potential limits on algo traders including speed bumps and steps to randomly delay execution of some orders.
Amid concerns over potential lack of a fair access to markets, Sebi agrees that algorithmic trading has become an integral part of the domestic market and rightly questions stock exchanges if some investors with no access to the high-frequency trading are at a disadvantage. It noted that algorithmic traders intentionally clogged the systems with a large number of orders. The regulator has also tightened the penalty rules by narrowing the range of algo orders to 0.75% of the last traded price compared to 1% earlier.
