Diary of a day trader - Part 2
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Tightening the norms for algorithmic trading, market regulator Sebi on Tuesday made it mandatory for the users to have their systems audited every six months and increased penalties on errant stock brokers.
Algorithmic trading or 'algo' in market parlance refers to orders generated at a super-fast speed by use of advanced mathematical models that involve automated execution of trade.
It is mostly used by large institutional investors and has raised concerns that algo exposes small investors, and the market itself, to possible systemic risks. Sebi first issued guidelines on algo trades in March 2012, after it witnessed a growing trend of usage of advanced technology for trading in financial instruments.
In a circular issued , Sebi said it had decided to review the algo guidelines following representations made by its Technical Advisory Committee and the new norms will come into effect from May 27.
As per the amended guidelines, stock brokers and traders offering algo facility would need to subject their algorithmic trading system to audit every six months so as to ensure compliance with the requirements prescribed by Sebi and the stock exchanges. Such audits would need to be undertaken by a system auditor with relevant certifications.
Sebi allows depositories to issue account statements
Sebi has also allowed the stock exchanges to impose "suitable penalties" in case of failure of the stock broker or trading member to take satisfactory corrective action within a time-period specified by the bourses.
"In order to further strengthen surveillance mechanism related to algo trading and prevent market manipulation, stock exchanges are directed to take necessary steps to ensure effective monitoring and surveillance of orders and trades resulting from trading algorithms," Sebi said.
The regulator has also asked the bourses to periodically review their surveillance arrangements to better detect and investigate market manipulation and market disruptions.
In March last year, Sebi had asked the exchanges to implement a framework of economic disincentives for high daily order-to-trade ratio for orders placed from trading algorithms by prescribing penalties in form of 'charges to be levied per algo orders' at various levels.
"The penalty rates specified by the stock exchanges have been reviewed and in order to provide sufficient deterrence, stock exchanges are directed to double the existing rates of 'charges to be levied per algo orders' specified in their circulars/notices," Sebi said.
The stock exchanges have also been asked to impose an additional penalty 'in form of suspension of proprietary trading right of the stock broker/trading member for the first trading hour on the next trading day in case a stock broker/trading member is penalised for maintaining high daily order-to-trade ratio', if such an entity has been penalised on more than 10 occasions in the previous thirty trading days.
Sebi said this step would discourage repetitive instances of high daily order-to-trade ratio. Sebi also said that the deficiencies or issues identified during the audit of trading algorithm or software of brokers would need to be reported to the stock exchanges immediately after the completion of such audits.
Further, the stock broker and trading members would need to take immediate corrective actions to rectify such issues or deficiencies. In case of serious deficiencies or issues or failure to take satisfactory corrective action, the broker or trading member would be barred from using the trading software till the time these issues are rectified and a satisfactory system audit report is submitted to the stock exchange.
The regulator has also directed the bourses to take necessary steps and put in place necessary systems for implementation of the new guidelines.
The bourses have also been asked to make necessary amendments to the relevant bye-laws, rules and regulations for the implementation of the algo guidelines, while they have also been directed to inform the brokers and trading members about the changes in the norms.
Algorithmic trading or 'algo' in market parlance refers to orders generated at a super-fast speed by use of advanced mathematical models that involve automated execution of trade.
It is mostly used by large institutional investors and has raised concerns that algo exposes small investors, and the market itself, to possible systemic risks. Sebi first issued guidelines on algo trades in March 2012, after it witnessed a growing trend of usage of advanced technology for trading in financial instruments.
In a circular issued , Sebi said it had decided to review the algo guidelines following representations made by its Technical Advisory Committee and the new norms will come into effect from May 27.
As per the amended guidelines, stock brokers and traders offering algo facility would need to subject their algorithmic trading system to audit every six months so as to ensure compliance with the requirements prescribed by Sebi and the stock exchanges. Such audits would need to be undertaken by a system auditor with relevant certifications.
Sebi allows depositories to issue account statements
Sebi has also allowed the stock exchanges to impose "suitable penalties" in case of failure of the stock broker or trading member to take satisfactory corrective action within a time-period specified by the bourses.
"In order to further strengthen surveillance mechanism related to algo trading and prevent market manipulation, stock exchanges are directed to take necessary steps to ensure effective monitoring and surveillance of orders and trades resulting from trading algorithms," Sebi said.
The regulator has also asked the bourses to periodically review their surveillance arrangements to better detect and investigate market manipulation and market disruptions.
In March last year, Sebi had asked the exchanges to implement a framework of economic disincentives for high daily order-to-trade ratio for orders placed from trading algorithms by prescribing penalties in form of 'charges to be levied per algo orders' at various levels.
"The penalty rates specified by the stock exchanges have been reviewed and in order to provide sufficient deterrence, stock exchanges are directed to double the existing rates of 'charges to be levied per algo orders' specified in their circulars/notices," Sebi said.
The stock exchanges have also been asked to impose an additional penalty 'in form of suspension of proprietary trading right of the stock broker/trading member for the first trading hour on the next trading day in case a stock broker/trading member is penalised for maintaining high daily order-to-trade ratio', if such an entity has been penalised on more than 10 occasions in the previous thirty trading days.
Sebi said this step would discourage repetitive instances of high daily order-to-trade ratio. Sebi also said that the deficiencies or issues identified during the audit of trading algorithm or software of brokers would need to be reported to the stock exchanges immediately after the completion of such audits.
Further, the stock broker and trading members would need to take immediate corrective actions to rectify such issues or deficiencies. In case of serious deficiencies or issues or failure to take satisfactory corrective action, the broker or trading member would be barred from using the trading software till the time these issues are rectified and a satisfactory system audit report is submitted to the stock exchange.
The regulator has also directed the bourses to take necessary steps and put in place necessary systems for implementation of the new guidelines.
The bourses have also been asked to make necessary amendments to the relevant bye-laws, rules and regulations for the implementation of the algo guidelines, while they have also been directed to inform the brokers and trading members about the changes in the norms.
My friend, I am presently in Goa, chilling out with a cold beer. Will be back day after to give you a proper reply. However, the following general guidelines should apply.
SL should be within your comfort zone.
SBIN & RCOM are liquid scripts, so if you place SL understanding the volatility / price spike which RCOm is prone to, you should be o.k.
I would rather exit a position which I do not want to hold on, so would have a trigger to warn me in advance when the price approaches SL. I can then decide to exit my position by watching the bid/ask around my exit price.
Trust this helps.
Good luck and trade safe - always.
SL should be within your comfort zone.
SBIN & RCOM are liquid scripts, so if you place SL understanding the volatility / price spike which RCOm is prone to, you should be o.k.
I would rather exit a position which I do not want to hold on, so would have a trigger to warn me in advance when the price approaches SL. I can then decide to exit my position by watching the bid/ask around my exit price.
Trust this helps.
Good luck and trade safe - always.
6240 has chances to come only if it crosses 6180 with force. Aankhein band kar lena agar aisa dikhe aur hanuman chalisa padna shuru kar dena! :lol:
Although on daily it shows a couple of candles dip but it could just be a minor retracement. Expiry is on, you never know how things pan out. Apun toh nifty vifty se vaise hi door rehte hain. Expiry mein toh bas bahar khade ho ki tamasha dekhte hain.
Although on daily it shows a couple of candles dip but it could just be a minor retracement. Expiry is on, you never know how things pan out. Apun toh nifty vifty se vaise hi door rehte hain. Expiry mein toh bas bahar khade ho ki tamasha dekhte hain.
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