Sebi Plans Speed Limits on High Frequency Trades
Date: 13.03.2012
Securities and
Exchange Board of India’s chief UK Sinha reiterated on Friday that the
regulator is considering imposing speed limits on high-frequency trading of
listed Indian shares.
“Earlier,
it was 200 micro second speed, then 20 micro second and then 8 micro seconds,
and there are still demands to reduce it even further. At some stage, this has
to stop. What we need to look at is whether it is serving any public good,”
Sinha said at the International Bar Association Conference.
“Also,
we need to look whether the regulator has the capacity to handle this. I doubt
stock exchanges and Sebi have the capacity. These are some issues that guide
us,” Sinha said. High-frequency trading ( HFT), or algorithmic trading
strategies, use mathematical models and powerful computers to order trades at
lightning-fast speeds.
As
opposed to manually punched trades, these trades are faster and so stand to
benefit from quick change in prices. But, such trading requires powerful
computers and programmes, which are expensive. So only institutions and wealthy
investors can use it. Such strategies also wipe out short-term arbitrage
opportunities for retail traders.
Source:
The Economic Times
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