Sebi weighs ways to rein in high-speed stock trading

Tags: News
Securities and Exchange Board of India’s International Advisory Board (IAB), which met last week in Mumbai, discussed several key matters like the recent flash crash episodes witnessed globally and in India.

“The pros and cons of high frequency trading (HFT)/algo trading on capital formation, efficiency of secondary markets and fairness to market participants were intensely deliberated,” Sebi said in a release.

“It was acknowledged that nearly all financial markets across the globe have these issues and the International Organisation of Securities Commissions (IOSCO) has been actively discussing ways in which regulators and exchanges should modify market structures to tackle the challenges posed by HFT,” Sebi release said.

“The most critical point that emerged was the need for regulator and exchanges to keep up with the developments and maintain the trust of participants by ensuring orderliness in markets,” Sebi release said.

The heads of national stock exchanges NSE, BSE, MCX-SX and USE also participated in this discussion.

IAB also discussed role of mutual funds in management of pension money, regulation of collective investment schemes, capital adequacy norms, regulation of research analysts.

Sebi constituted the IAB in September 2011. The role of the IAB is to guide Sebi and, in doing so, bring in the global experiences and emerging developments and challenges.

The current members of the IAB, in addition to the chairman, Sebi are Viral Acharya, Jane Diplock, Mark Maletz, Maureen O’Hara, Arvind Panagariya and Andrew Sheng.

IAB acknowledged that the mutual fund industry under Sebi regulations has evolved over time and, therefore, Sebi and mutual fund industry in India should have an active partnering role to play in the development and penetration of pension industry in India.

The IAB extensively discussed the issue relating to regulatory gap in respect of various unregulated collective investment schemes and money circulation schemes in India.

The role played by various entities as research analysts in India and the extant regulations governing them were deliberated upon. A view emerged that the analysts providing services for a fee should be regulated under the proposed Investment Advisor Regulations of Sebi. As far as other analysts are concerned, it was suggested that, to begin with, a separate code or set of guidelines may be prescribed.

The IAB also discussed the need for reviewing the capital adequacy norms for market intermediaries to meet the unknown and non-market risks faced by intermediaries and IAB felt there was a need to link the capital adequacy requirement with the extent of proprietary trading undertaken by a trading member.

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