Mumbai, February 27, 2017

Sebi is looking at imposing a bigger penalty for misuse of high-speed algo trades as also “following up” on full implementation of directions it issued in the case involving NSE, outgoing chairman U K Sinha said today. While emphasising that India is one of the very few countries which has some mechanism for preventing misuse of algo trading, Sinha said the regulator is reviewing whether the penalty for misuse should be increased. “Sebi has provided certain minimal regulations on algo such as we have provided penalty system on high orders trade. We are reviewing if penalty should be enhanced further. “We also have taken into consideration that what happened outside India is not repeated by putting abstract number on how many orders can be placed,” he said in his last press meet as Sebi Chairman.

His comments come amid concerns arising out of a probe into alleged lapses involving the co-location facility of NSE, the country’s biggest stock exchange. According to Sinha, the difficulty is that it is a highly technical issue and also that people who comment on the subject have conflict of interest. “They are either technical providers of algo or its users. And I don’t blame them (as) they have put money in it,” he said, assuring that Sebi would not like to do anything disruptive. Stating that another comment is that why is Sebi trying to imitate other countries and not go by its own data, Sinha said, a highly evolved expert technical team is looking at the trading data to look at possible way of sorting out the issues.

“Once analysis is complete we will be able to take it forward,” he said. Sinha also said that many jurisdictions have been debating about algo trades for years and some of them have come out with consultation papers but none of them have been able to come out with final regulations because it is a difficult area. About the NSE matter, Sinha said the regulator is following up its directions that have to be implemented by the exchange. “Sebi got its own examination and based on it, we gave certain directions. Majority of directions have been implemented but some have not been.

“We are following up the matter with concerned agencies and this matter will be taken to its logical conclusion. We are steadfast on our findings,” he said. Earlier this month, Sebi shared a status report with its board on action taken by it following complaints about certain brokers getting preferential access and alleged lapses relating to NSE’s co-location facility.

[The Financial Express]