Sebi proposes allowing retail participation in algo trading

Sebi proposes allowing retail participation in algo trading

Sub: Eco

Sec :Capital Market

What is Algo trading?

Algo trading refers to orders generated using automated execution logic. Such trading provides significant advantages of timed and programmed order execution.

Algorithmic trading in India

• Algorithmic trading was introduced and allowed in India in 2008 by the Securities and Exchange Board of India (Sebi).
• Initially, it started with Direct Market Access (DMA) and was restricted to institutional investors only, but due to the cost advantage and better execution, the trading community welcomed it with open arms.

Benefits of Algorithmic Trading

• Trades are executed at the best possible prices.
• Trade order placement is instant and accurate (there is a high chance of execution at the desired levels).
• Trades are timed correctly and instantly to avoid significant price changes.
• Reduced transaction costs.
• Simultaneous automated checks on multiple market conditions.
• Reduced risk of manual errors when placing trades.
• Algo-trading can be back tested using available historical and real-time data to see if it is a viable trading strategy.
• Reduced the possibility of mistakes by human traders based on emotional and psychological factors.