Algorithmic Trading in India

Do you believe aglotrading can be beneficial in India

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Previously algorithmic trading did the simplest tasks rather faster, for example buying something on one exchange and selling it on another, capturing the difference of an arbitrage and gaining profit. It has got a bit more sophisticated using futures or options, to create profitable trades that enter and exit in milliseconds. Nowadays some of the algotrades are way too complex, using the concepts of physics and developers with a PhD degree building the programs that gains profit from analyzing news, announcements, or price movements around the globe, with the help of artificial intelligence and computer learning.
On April 3rd 2008, Securities & Exchange Board of India (SEBI), introduced algorithmic trading by allowing Direct Market Access to institutional customers. Direct market access enables specialists to give their framework to customers and gives them access to the trade exchanging framework with no interference. It was given uniquely to institutional customers and not retail merchants from the outset. Now algorithmic trading controls nearly one third of all trades.
There are pros and cons of algorithmic trading, in India during a Diwali mahurat trading session prices of certain derivatives plunge around 20%. Later it was discovered, the reason was a faulty algorithmic trading software at a broker. The trades of those derivatives on that day were annulled. On the other hand algo trading has helped to reduce the cost of transaction for the investors as well as increase the speed of the transaction.
But the advance algorithmic trading has posed threats in the form of scams, one such scam that happened in India was NSE Co-Location scam. The stock trade gave information to representatives in a cooperative instrument, sending it first to whoever associated with its exchanging framework first, and afterward to the subsequent agent, etc. The person who got associated first would get the information first and with innovation, even a second ahead of schedule was sufficient. Computers could then gain enough from this "early" information to place orders ahead of anyone else. In all, profits were made, and after an investigation, even taken away from the people doing it. This issue was so complex that without detailed information from a whistle-blower, it would have been impossible to detect.
After such incident, SEBI regularly comes with various rules and regulations that are to be followed by the traders and brokers to keep the industry safe and risk controlled. Risk management is critical with algorithmic trading. That is the reason, for any calculation to be affirmed by the business sectors, trades require a firm to experience a progression of stringent tests on the off chance that it plans to exchange through algo exchanging.
Although there have been a lot of issues, with several amendments over the years, India provides a good opportunity for algorithmic trading due to a number of factors such as co-location facilities and sophisticated technology at both the major exchanges a smart order routing system and stock exchanges that are well-established and liquid.


New member
Yes, in the recent decade, algorithm trading in Indian stock market has proved to be quite beneficial. Now over 43% of the trading is algorithmic and has proved to be quite beneficial
Yes but at the same time, if in wrong hands it can cause huge losses to the economy. Regulatory bodies have to be very alert as catching such scams is very difficult.