BSE Brokers Forum divided on issue of restricting algo trades

BSE Brokers Forum today said its members are divided on Sebi's proposed plans to tighten norms on high frequency trades (HFT), also referred to as algorithmic (algo) trades.
Algorithmic trading refers to orders generated at a super-fast speed by use of advanced mathematical models that involve automated execution of trade, while co-location (colo) involves setting up servers on the exchange premises.
As per BSE Brokers Forum Vice-Chairman Alok Churiwala, the steering committee of the forum looking into the matter is divided on the issue and has requested a week's time to further deliberate on it at the board level.
"There are two sets of people, one, who are using this facility (algo) and the large majority who are not using them. Some don't even know what this animal is. They believe that there is no level playing field, neither there is any concrete economic value addition to the lay investor," Churiwala said.

"The argument on the other side is liquidity, depth and volumes are being provided by algo/High Frequency Trading/colo players resulting in lower impact costs. There are credible reasons on both sides of the issue," he added.
The forum, a member of International Council of Securities Association (ICSA), has also found through an international survey that many are not in favour of any restrictive rules or throttles being placed on such trades.

"Despite this, if Sebi has suggested these changes, there may be, in its wisdom, some merit in the Indian context.
"Hence, we intend to once again debate this very significant and far reaching issue at our full-fledged board of 24 members later this week, before submitting our conclusions to the regulator as this issue may threaten to have immense impact on the future of the capital markets of this country," he added.

Market regulator Sebi had earlier this month proposed to introduce resting time for orders, random delays and speed bumps, separate queues for co-location and non-co-location orders for strengthening the regulatory framework for algo trading and co-location facility.