Mumbai: SEBI chief U K Sinha on September 27 said the capital markets regulator will consult the government, the RBI and high frequency trading (HFT) technology providers before taking a final call on tweaking norms related to super-fast algo trades.
The Securities and Exchange Board of India (SEBI) has already floated a consultation paper on algo trade, wherein it has proposed various checks and balances to prevent any misuse of such mechanism.
"We have received a number of feed backs and the Sebi technical advisory is looking into all the inputs that have been received," Sinha told reporters here on sidelines of a CII seminar on corporate bond market in BRICS.
"...we propose to have interaction with various groups such as technology providers of HFTs, the firms which are actually using HFTs, small brokers, small traders, investment advisers or investor associations," he added while observing that SEBI wants an open discussion on various aspects of co-location and algo trading.
Noting that consultation of the issue would be "wide ranging," the chairman said SEBI will also have discussions with the government and the Reserve Bank of India (RBI) following which a final view would be taken on HFT norms.
Under the proposed norms, SEBI could introduce resting time for orders, random delays and random speed bumps, separate queues for co-location and non co-location orders for strengthening the regulatory framework for algo trading and co-location facility.
HFT also called algorithmic trading or 'algo' in market parlance refers to orders generated at a super-fast speed by use of advanced mathematical models that involve automated execution of trade, and it is mostly used by large institutional investors.
The rise of HFT has raised concerns in the country with regard to its impact on market quality, financial stability and regulatory framework. Asked about the possibility of allowing Foreign Portfolio Investors (FPIs) to trade directly without brokers in equities, Sinha said there is "no such case".
The SEBI board, last week, had decided to allow well-regulated FPIs to trade directly in bonds without any broker. Currently, FPIs can trade in Indian markets only through brokers who are registered with the stock exchanges as their members.