BSE, NSE to impose charge on high algo OTR in equity segment from Jun 29

Leading exchanges BSE and NSE have said that charges for high algo order to trade ratio (OTR) will be levied in the equity segment from June 29.

The bourses currently levy charges for high algo OTR in equity derivatives and currency derivatives segments.

Algorithmic or algo trading refers to high-frequency and automated execution of trades on the stock exchanges through pre-programmed software platforms installed on servers.

In two separate but similarly worded communications dated June 22, the exchanges said, trading "members are hereby informed that along with equity derivatives and currency derivatives segment, charges for high order to trade ratio shall also be levied in equity segment with effect from June 29, 2018".

The charges will be computed at member level on a daily basis and collected on a monthly basis, after reckoning all algo orders and algo trades of the member, BSE said in a notice.

For daily algo OTR of less than 50, there will be no charge. In case it is from 50 to less than 250, the amount will be 2 paise per algo order.

The daily algo OTR from 250 to less than 500 will attract 10 paise per order, while a similar amount will be charged if it is 500 or more than that.

"In case the order to trade ratio is 500 or more than 500 during a trading day, the concerned trading member shall not be permitted to place any orders for the first 15 minutes on the next trading day as a cooling off action and shall be able to place orders only after 15 minutes of the normal market open in equity segment," BSE said.

On several occasions in the past, the Securities and Exchange Board of India (Sebi) has advised stock exchanges to put in place effective economic disincentives for high daily OTR of algo orders placed by members in order to ensure orderly trading in the market.

In April, the Sebi had come out with a direction to exempt the algo orders placed within 0.75 per cent on either side of the last traded price from the framework for imposing a penalty for high OTR.

"... there will be an additional penalty in form of suspension of proprietary trading right of the trading member for the first trading hour on the next trading day, in case a trading member is penalized for maintaining high daily order to trade ratio, provided penalty was imposed on the trading member on more than ten occasions in the previous thirty trading days (on rolling basis)," NSE said in a circular.