Livemint summary 1st Jan

https://epaper.livemint.com/Home/ArticleView 


Why SEBI wants to tighten algo savings norm?

What is algo trading?
It is a type of trading that relies on algorithms in the computer and not on human intervention. Trading can be done very rapidly in milliseconds. 
1970s- Wall Street started algo trading
2008- Algo trading is available in India only to institutional investors
2016- Algo trading is opened to retail investors
50% of equity trading are algo trading and so are 65% of cash market trading. 

Cash market trading- buying and selling of securities without loan or margin and using only the cash at hand.

Three parties in the chain:
The stockbroker
The client
The company providing the algo

Clients use APIs to access the broker's trading platform without logging in. 

Why is algo trading a concern?
Many algo trading platform developers who are outside the ambit of SEBI or who flaunt SEBI rules create simple algorithms and project it to be complex to lure gullible clients of assured returns and the like. 

Proposals from SEBI:

Stop all API platforms where the broker does not get to know that the client is using the platform. 
1. Stockbrokers will have to get their API platform under the regulatory ambit of SEBI and be responsible for data security. 

A Performance Validation Agency will verify the activity of the algo platform then the algo platform can share its past performance. 

Systematic risks from algo trades:

All these algo platforms use the prevalent market conditions to make their algorithms and in the case of a black swan event, all this will go haywire and cause a market meltdown. 

Institutional investors employ some supervision so they are at lesser risk than the retail investors where it is not possible to know whether API has been used to make the investment or not. 

 

Court's rebuke

SBI did not disclose the details of electoral bonds despite Supreme Court's orders on 30th June. 
CJI DY Chandrachud heads the five member panel that is hearing the case. 
They warned the SBI that a second time it fails to respond to the court orders within deadlines, hostile actions would be taken against the SBI.


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