India Might Seek to Curb HFT and Algorithmic Trading

The market regulator for India’s equity markets is close to hopping on the anti-high-frequency trading bandwagon and seeking market controls to curb their activity. regulations could also be in the offing for algorithmic trading as well.

According to a story first published in the Hindu BusinessLine, the Securities and Exchange Board of India (SEBI) is contemplating introduction of a lock-in period for algo and high-frequency trading orders to help check manipulation by traders, citing SEBI sources were not identified.

This would make India the latest equity market to consider revamping or outright changing its market structure to limit the effects of hyper fast traders and electronic software.

However, according to Indian market experts, the introduction of a lock-in period for algorithmic or high-frequency orders would not be a plausible solution.

“Introduction of lock-in is not the solution to this problem, enhancing surveillance capability is,” a senior official of a clearing corporation told the Hindu BusinessLine.

Another technology expert said, “It is also possible to write algorithms to execute what they are presently doing after factoring in the lock-in period.”

According to SEBI, the share of algo orders in total orders and the share of cancelled algo orders in the total number of cancelled orders was around 90 per cent. It also observed that volumes in algo trading and high-frequency trading increased substantially in the cash segment of the equity market to about 40 per cent of total trades in both the exchanges in March 2015.