The capital market regulator is now working on the ways to reduce the risks in algorithmic trading and make it safer for the investors. Bloomberg reported very recently from Kolkata that the Securities and Exchange Board of India is looking at the ways to reduce the risk factors in the algorithmic trading and the High frequency trading and the SEBI wants them both to be a safer platform for the investors and other marketers. Bloomberg told this after a meet with U.K. Sinha who is the chief of SEBI.
Automated algorithms will be made safer soon
The algorithms and software codes are used frequently to enhance the process of matching the orders in the market. This algorithm differs for different companies as they follow their own policies and ideas of trading. Trading in the market based on these algorithms is usually called as algorithmic trading. This is usually faster than the human interpretation with the market. But this speed itself has become a major problem in finding out the safer side of the market. The marketers have a fear that this speed may end up in creating a volatility of the market.
This issue has been flagged by the reserve bank of India. In the Financial Stability Report which was released in the month of June, RBI has mentioned a statement that the rapid increase in the usage of algorithmic trading in the Indian market is giving raise to the precautionary measures to be followed for the security of the Indian market. The RBI report has clearly mentioned about the growth of algorithmic trading in the Indian market. It was noted that the 11% turnover from algorithmic trading in the year 2011 has turned into 40% turnover in the year 2015 through the algorithmic trading.
RBI report says reduction in latency needs focus
The increased complexity of the algorithms depending on the policies of each company and the general reduction in the latency that happens due to the faster communication in the algorithmic trading definitely need to be focused. There are chances that this can have high risks for the investor and the market and hence a constant monitoring is required. The risks of algorithmic trading include possibilities of the error trades and the mistakes that occur in the market manipulation. Latency is nothing but the technical term that is generally used to indicate the lag that occurs in ordering and purchasing.
On July 1, Bloomberg has reported that the SEBI is working out with a lock in proposal that will be helping out the market during the risky period by cancelling all the algo orders for certain period of time. Regarding merging the Forward Markets Commission with the SEBI, Sinha told that the process will be completed by the end of September. He has also mentioned that in the world market it is hard to find two regulatory bodies merging together. After this gets over, the SEBI was expected to work with the commodity derivatives.
Automated algorithms will be made safer soon
The algorithms and software codes are used frequently to enhance the process of matching the orders in the market. This algorithm differs for different companies as they follow their own policies and ideas of trading. Trading in the market based on these algorithms is usually called as algorithmic trading. This is usually faster than the human interpretation with the market. But this speed itself has become a major problem in finding out the safer side of the market. The marketers have a fear that this speed may end up in creating a volatility of the market.
This issue has been flagged by the reserve bank of India. In the Financial Stability Report which was released in the month of June, RBI has mentioned a statement that the rapid increase in the usage of algorithmic trading in the Indian market is giving raise to the precautionary measures to be followed for the security of the Indian market. The RBI report has clearly mentioned about the growth of algorithmic trading in the Indian market. It was noted that the 11% turnover from algorithmic trading in the year 2011 has turned into 40% turnover in the year 2015 through the algorithmic trading.
RBI report says reduction in latency needs focus
The increased complexity of the algorithms depending on the policies of each company and the general reduction in the latency that happens due to the faster communication in the algorithmic trading definitely need to be focused. There are chances that this can have high risks for the investor and the market and hence a constant monitoring is required. The risks of algorithmic trading include possibilities of the error trades and the mistakes that occur in the market manipulation. Latency is nothing but the technical term that is generally used to indicate the lag that occurs in ordering and purchasing.
On July 1, Bloomberg has reported that the SEBI is working out with a lock in proposal that will be helping out the market during the risky period by cancelling all the algo orders for certain period of time. Regarding merging the Forward Markets Commission with the SEBI, Sinha told that the process will be completed by the end of September. He has also mentioned that in the world market it is hard to find two regulatory bodies merging together. After this gets over, the SEBI was expected to work with the commodity derivatives.