Markets regulator Security and Exchange Board of India (SEBI) has proposed a new norm for super-fast algorithmic trading and co-location facility, including by suggesting 'speed bumps' and separate queues for algo and non-algo trades, in order to stop inequitable trading access to the exchanges.
Algorithmic trading or 'algo' refers to orders generated at a speed by use of advanced mathematical models that include automated execution of trade, whereas co-location involves setting up servers on the exchange premises.
SEBI has decided to introduce resting time for order, delays and speed bumps, separate queues for co-location and non-co-location orders for consolidating regulatory framework for algo trading and Co-location facility.
The regulators across the world are looking to find an effective solution for this.
Sebi has asked for public suggestions on the proposal till the end of this month and final guidelines would be put in place after taking into account views of all the stakeholders.
Speed bump mechanism includes introduction of randomised order processing delay of few milliseconds to orders.