Markets regulator Securities and Exchange Board of India (Sebi) on Wednesday decided to strengthen algo trading framework by mandating the exchanges to offer shared co-location facilities and providing some services for free.
The regulator’s board has decided to review trading requirement for algo software for strengthening algorithmic trading framework by mandating stock exchanges to provide a simulated market environment for testing of software used for such high-frequency trades, Ajay Tyagi, Sebi chairman, said.
Sebi also informed that stock exchanges to introduce shared co-location services in order to reduce the cost for the trading member. The bourses will also provide tick-by-tock data (TBT feed) to all the trading members, free of charge. A penalty would be levied on algo orders placed beyond ±0.75% of last traded price (LTP) from the current level of ±1% of LTP, according to penalty framework for Order to Trade Ratio (OTR).
Further, the OTR framework will be extended to orders placed in the equity cash segment and orders placed under the liquidity enhancement scheme (LES).
Stock Exchanges will allot a unique identifier to each algorithm approved and each order generated by the algorithm to carry the unique identifier with it, in order to establish an audit trail and to ensure better surveillance of Algo trading.
According to existing criteria like market-wide position limit and median quarter-sigma order size should be revised higher from the current level of Rs 300 crore and Rs 10 lakh to Rs 500 crore and Rs 25 lakh respectively. An additional criterion, of average daily ‘deliverable’ value in the cash market of Rs 10 crore, has also been prescribed.
The enhanced criteria are to be met for a continuous period of six months. Stocks which are currently in derivatives, but fail to meet any of the enhanced criteria would be physically settled whereas stocks which are currently in derivatives and meet the enhanced criteria should be cash settled.
Such stocks would exit the derivativee segment if they fail to meet any of the enhanced criteria within a period of one year from the specified date.
Sebi said, “There will be an increase in maximum investment amount in venture capital undertakings by an angel fund in any venture capital undertaking from Rs 5 crore to Rs 10 crore. The requirement of a minimum corpus of an angel fund reduced from Rs 10 crore to Rs 5 crore. There will also be an increase in maximum period for accepting funds from three to five years.”
EVERYBODY IN FAST LANE
- Stock exchanges will allot a unique identifier to each algorithm approved and each order generated by the algorithm to carry the unique identifier with it
- An additional criterion, of average daily ‘deliverable’ value in the cash market of Rs 10 crore has also been prescribed
