On Wednesday, the Securities and Exchange Board of India (SEBI) announced its plans to make algorithm trading cheaper to investors. This decision comes in the face of looming concerns over fair trade access that resulted in more stringent monitoring of trades.
Some of the measures to make algo trading more accessible include providing investors with tick by tick data feed for free and making servers at exchange sites more accessible. The tick by tick feed will provide investors with information about the best prices for all stocks in real-time, which will level the playing field for all investors.
Algo trading has been gaining in popularity in India and this has resulted in regulators questioning the possible disadvantage to those investors who do not have access to it. Making algorithm trading more accessible will enable a large number of retail traders high-technology trading opportunities at a low cost.
SEBI also made a proposal to develop a framework for penalties regarding high order rates that are not converted into trades. This comes after the range for algo orders was restricted to 0.75% of the last traded price. This penalty would also be extended to orders that have been placed under the liquidity enhancement scheme as well as in the equity cash division. Stock exchanges have been asked to establish an audit trail by allotting unique IDs for every approved algorithm and order generated.
In addition to making algo trading cheaper, SEBI also approved a proposal for the physical settlements of all stock derivatives to be performed in gradual stages. There were also a number of issues that were highlighted, including material-related party transactions, disclosures, compliance related to minimum public shareholding requirements and reclassification of promoters.