SEBI to tighten algo trading rules

algo-tradingThe Securities and Exchange Board of India (SEBI) plans to further tighten the regulations for algorithmic trading to minimise instances of misuse of such systems that can be used to execute complex trading strategies at a very high speed.


What is algorithmic trading?

Algorithmic trading refers to the use of software programmes to execute trading strategies at a much faster pace. On the National Stock Exchange (NSE), algo trades accounted for close to 16% of all trades. On the BSE, it was 8.56% in January.

Need for strengthening of rules

India was one of the few countries in the world to regulate algorithmic trading — popularly called algo trading. SEBI is looking to further strengthen the norms so that instances of flash crashes that have happened overseas, and also in India a few times, could be minimised.

Background

While many countries and regulators, including the International Organization of Securities Commissions (IOSCO), have been debating on this issue for many years, only India had been able to come out with proper regulations.

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