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Automated trading in India

Published in Automated Trader Magazine Issue 41 Q4 2016

India's securities market regulator, the Securities Exchange Board of India (SEBI), has released a discussion paper on proposed regulation in the algorithmic trading/high frequency trading space.


Nitesh KhandelwalNitesh Khandelwal is a director at QuantInsti , a training and research institute in the quantitative and algorithmic trading space which is head-quartered in Mumbai. He is responsible for the launch of the Executive Programme in Algorithmic Trading (EPAT), an online course on algorithmic trading for working professionals.

Since the wave of economic liberalisation in the early 1990s, India has made a name for itself within both Information Technology (IT) and analytics. When SEBI finally permitted automated trading in 2008, proprietary trading firms across the country were able to draw on the country's large pool of IT talent. Within a few years, automated trading had claimed the majority of the volume going through India's exchanges.

The initial approval of Direct Market Access (DMA) by SEBI in April 2008 was soon followed by additional measures that allowed automated trading to become established in its own right. Co-located servers and high frequency market data were introduced to the marketplace. Technology had begun to play a crucial role in India's financial market and in the minds of its participants. This was similar to the wave of enthusiasm toward e-commerce that had captured the imagination of the whole nation at around the same time.

Current participation by automated traders

Over the past eight years, leading exchanges in India have seen a healthy increase in the proportion of volume traded through automated trading. As per the National Stock Exchange of India's (NSE) monthly report for July 2016 (available on its website), almost 50% of the volume in equities came from algorithms (see Figure 01). And almost a third...

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