Concerned over unfair play through the use of high frequency trading (HFT), Sebi chief U K Sinha said on Thursday that it is working on solutions relevant to the Indian securities market and is determined to put in place checks and balances related to such technologies. Sebi has received many “strong comments” on its proposed norms for HFT including suggestions that it should focus on, norms which would cater to India’s specific requirements and not adopt practices from other parts of the world, he said. Sinha was addressing a gathering at the CII Financial Market Summit in Mumbai on Thursday.
Noting that suggestions have come for Sebi to have its own data, Sinha said, “Let me assure that some of the best technical brains are right now working, analysing the trading data to find out what is relevant in our markets and unique to our market”.Assuring that no action would be taken over HFT norms without consultation with all stakeholders, he noted that high frequency trading and co-location are areas of concern for Sebi as risks are involved in such technologies and can lead to unfair advantage to certain number of people. High frequency trading, also called algorithmic trading or ‘algo’ in market parlance refers to orders generated at a super-fast speed by use of advanced mathematical models that involve automated execution of trade, and it is mostly used by large institutional investors.
HFT exposes the market to possible systemic risks.The increased use of HFT has raised concerns with regard to its impact on market quality, financial stability and regulatory framework. Earlier this year, Sebi had come out with a discussion paper on tightening HFT norms.