India’s Market Regulator Moves to Slow Down Super-Fast Trading

  • Sebi mulls speed bump, frequent batch auctions to delay trades
  • Measures to “allay fear" of unfair access to bourses: Sebi

India’s markets regulator is considering checks on high-frequency trading in an effort to strengthen rules for algorithmic trading.

The Securities & Exchange Board of India, or Sebi, plans to introduce measures including a speed bump and minimum resting time to delay orders so that all participants see the market at the same speed, the regulator said in a discussion paper released after trading ended Friday.

The regulator is also considering randomizing orders rather than prioritizing them on when they get to the market, as well as steps to prevent traders from canceling an algorithmic order until it is confirmed by the exchange, to counter the practice of seeing an order show up momentarily before it’s scrapped.

The measures 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 exchanges. The misuse of algorithmic trading, such as placing orders without any intention to trade is not “a healthy practice” as it’s a manipulative strategy that disrupts the markets, Chairman U. K. Sinha said in an interview last month.

High-frequency and algorithmic transactions now account for 40 percent of total volume in India, the highest proportion in the developing world and up from the low single digits five years ago, according to Aite Group, a Boston-based consulting firm. Sebi had issued broad guidelines on HFT in 2012 and 2013, and has said it’s considering new restrictions.

The regulator has invited comments from market participants on the proposed measures by Aug. 31, according to the release.