SEBI to bring algo trading guidelines in two months

The Securities and Exchange Board of India (Sebi) plans to introduce within two months new norms to regulate algorithmic trading.

Algorithm-based trade or high frequency trades are prone to high risks. We are examining a number of options to bring down these risks.

The Reserve Bank of India had recently cautioned against these trades. The increased complexities of algo coding and reduction in latency due to faster communication platforms need focused monitoring, as they may pose risks in the form of increased possibilities of error trades and market manipulation, .

These include relaxing many of the earlier norms to encourage start-ups to list in the country. To keep retail investors away from the soon-to-launch trading platform for start-ups, Sebi has prescribed a high trading lot size of Rs 10 lakh. However, it has included mutual funds in the definition of qualified institutional buyers, enabling indirect entry of non-wealthy individuals in the trading segment.

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