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The BSE, the country’s second biggest stock exchange and Asia’s oldest bourse, is well equipped to handle 1,000 times more investors and volumes, its Managing Director and Chief Executive Ashish Chauhan has said.
He, however, rued that the number of people participating in the stock markets have not grown in line with the expectations.
“Although we have a clean house, we have not got more people to participate. Maybe there is some failure at our end. We may need to reach out more,” Chauhan said at a seminar on policy and regulatory framework for Algorithmic/High Frequency Trading, organised by Department of Economic Affairs and National Institute of Financial Management (NIFM) here on Monday.
Chauhan also noted that while India’s middle class had witnessed good growth in recent times, the number of market participants had not seen a commensurate increase.
Later, asked whether investors coming into the market through the mutual fund route were vitiating the picture as regards increase in direct market participants in stock markets, Chauhan replied in the negative.
“There is a good pick-up in mutual fund assets. But most of that is because of the increase in the number of folios and not increase in the number of investors. If you carefully analyse, the universe of investors is not going up significantly, but the number of folios are indeed going up significantly,” Chauhan told BusinessLine .
Chauhan said India is “pretty much” on a par with the rest of the world with regard to regulating algorithmic trading, popularly referred as Algos. The framework is consultative and evolving, he added.
Algo trading Algorithmic (or algo) trading refers to a form of order execution using a software that automatically place orders based on certain mathematic models.
High Frequency Trading (HFT) is a subset of algorithmic trading and this is used by firms to primarily compete on speed to profit from trading opportunities.
Vikram Limaye, Managing Director and CEO, NSE, the country’s largest bourse, said ‘Algos’ were here to stay. “Part of the issues raised around Algos are fear of the unknown. We need to develop more algos to be ahead of the curve. We will also need to see increasing use of algos in surveillance.” Last August, SEBI had released a discussion paper on regulating algorithmic trading. It had sought public comments on seven methods, some or all of which could be undertaken by the regulator to regulate high- frequency traders.
These include introduction of a minimum resting time for orders, matching orders under a batch system, introducing speed bumps or random delays of a few milliseconds in order processing, and capping of order-to-trade ration.
SEBI is also looking to do away with the current system of sending orders to the matching engine-based to time priority.
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