'Sebi's plan canrestrict growth of algo trading in India'
In its attempt to weed a few bad cases, Sebi putting in hurdles that can restrict the growth of algo trading in India: Brokers
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New Delhi: Markets regulator Sebi's proposal of treating all orders emanating from application programming interface (API) as algorithmic or algo order can restrict the growth of such trading in India, brokerage houses said on Monday.
In market parlance, algo trading refers to any order that is generated using automated execution logic. The algo trading system automatically monitors the live stock prices and initiates an order when the given criteria are met. This frees the trader from having to monitor live stock prices and initiate manual order placement.
Vikas Singhania, CEO, TradeSmart, said that regulating the nascent algo market is the need of the hour, especially since the media has reported a number of cases of retail clients losing money based on false promises made by some vendors.
"However, in its attempt to weed a few bad cases, Sebi is putting in hurdles that can restrict the growth of algo trading in India. It will be difficult for brokers to provide APIs if the conditions mentioned in the consultation paper are implemented," he added.
However, Rahul Shah, co-head (research), Equitymaster, said: "The proposal on algo trading will go some way in ensuring that nobody is able to game the system and everyone, right from the smallest investor, is on an equal footing when it comes to executing buy and sell orders. There's no doubt technology and automation have made the markets more efficient and led to better price discovery. However, the very same tools can be misused using algo trading where some investors could end up seeing stock prices ahead of others by a few milliseconds, thereby putting the latter at a disadvantage."
