India to slow down high-frequency trading
MUMBAI: India’s markets regulator plans to introduce steps to slow down high-frequency trading (HFT) in the next three months, according to its chairman.
The Securities & Exchange Board of India (Sebi) is considering mandating a fraction-of-a-second speed bump and alternating execution between computer and manual orders, said chairman U.K. Sinha in an interview at his office, here.
The regulator is also examining a proposal to prevent traders from cancelling an algorithmic order until it is confirmed by the bourse, to counter the practice of seeing an order show up momentarily before it’s cancelled.
“The worry about misuse or mishap because of HFT and colocation is not over,” said Sinha. “It’s an issue and we haven’t solved it yet.”
Colocation is the practice of placing a trader’s servers next to that of an exchange to minimise the time it takes to trade.
Sebi planned to come out with a discussion paper on the proposed changes within a month and could implement final guidelines in three months if no further consultation was needed, said Sinha.
Also under consideration was randomising orders rather than prioritising them on when they get to the market, and making order book information public to ensure there was no preferential treatment, he said.
Sinha’s comments come amid a growing chorus in India calling for Sebi to take action against what they say is high-frequency traders gaining preferential access at the National Stock Exchange of India.
Placing orders without any intention to trade was not “a healthy practice” as it was a manipulative strategy that disrupts the markets, said Sinha.
“We want to be assured that things will be orderly and there are fewer chances of negative surprises and deviant behaviour.” Bloomberg