To prevent possible manipulations in trading activities, Sebi Chairman U K Sinha today told brokers that there should be a level-playing field for high frequency trades and cautioned that strict action will be initiated against such violations.
During his meeting with brokers, Sebi chief discussed a range of issues, including cyber risks, ways to attract more retail investors into the capital market and boost commodity derivatives trading.
According to sources, Sinha discussed in detail high frequency trading (HFT), also known as algo trades, and emphasised that the capital market regulator is not against HFT, but expects a level-playing field in this regard.
"Sinha said Sebi would take action in case it finds lack of level-playing field for all players," one of the brokers who attended the meeting said.
The market regulator already has strict norms in place on such trading. Recently, concerns have been expressed in certain quarters that some entities might be at an advantage in carrying out HFT.
Besides, the brokers' community have been assured that they would soon be allowed to trade in equities as well as commodity derivatives from the same broking platform.
"He (Sinha) told us that some time during this year, we will be allowed to trade in commodities as well as securities from the same broking platform," a broker said.
The move would help investors as the procedure for brokers is same with regard to equities and commodity derivative trading activities.
The Securities and Exchange Board of India (Sebi) has been taking steps to streamline norms for commodity derivatives with those of equities since the merger of the Forward Markets Commission (FMC) with itself last year.
The matter of online registration facility for commodity brokers was also discussed.
Among others, Sinha sought suggestions from brokers on ways to increase retail participation in the securities market.
"Some brokers suggested penetrating into tier 3 and tier 4 cities as capital may be adequate in these regions post monsoon... Besides, we suggested that margins in the cash market be reduced," a broker said.
Issues pertaining to the National Spot Exchange Ltd
(NSEL) also came up for discussion at the meeting. In the nearly Rs 5,600-crore payment crisis at the bourse, some brokers have also come under the scanner for alleged violations, the sources said.
Urging brokers to be alert against cyber threats, Sinha also asked large brokers to prepare their systems and technology against cyber attacks.
Discussions also touched upon having a common KYC (know-your-client) mechanism for the entire finance sector.
In this regard, Sebi is in talks with the Reserve Bank of India (RBI).
A group of 15-20 stock brokers, including members of BSE Broker Forum, Association of National Exchanges Members India (ANMI), Goldman Sachs, Deutsche Bank, Kotak and JMFL, participated in the meeting.
