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Sebi comes out with guidelines on order-to-trade ratio for algo trades


New Delhi: Markets regulator Sebi on Wednesday put in place new framework on order-to-trade ratio (OTR) of algo orders positioned by inventory brokers.

Algorithmic trading or ‘algo’ in market parlance refers to orders generated at a super-fast pace by means of superior mathematical fashions that contain automated execution of trade, and it’s principally utilized by massive institutional buyers.

In a round, the Securities and Trade Board of India (Sebi) mentioned it has determined to change current OTR framework after receiving requests from the inventory exchanges.

Underneath the framework, inventory exchanges could also be permitted to introduce further slabs as much as an OTR of two,000 (from current OTR of 500), and for OTR greater than 2,000, such slabs may be launched with deterrent incremental penalty, which inventory exchanges could resolve collectively.

On the third occasion of OTR being 2,000 or extra, within the final 30 days (rolling foundation), the involved member won’t be permitted to position any orders for the primary 15 minutes on the subsequent trading day as a cooling off motion.

Sebi has requested recognised inventory exchanges to make needed modification to their current guidelines wherever required.

Earlier in April 2018, Sebi had suggested inventory exchanges to place in place efficient financial disincentives for excessive each day order-to-trade ratio of algo orders positioned by trading members.

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