Published On: Mon, Mar 12th, 2012

Sebi Plans Speed Limits on High Frequency Trades

Upendra Kumar Sinha SEBI Chairman

Upendra Kumar Sinha SEBI Chairman

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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