The Securities and Exchange Board of India (SEBI) is working on tightening regulations for algorithmic (algo) and high-frequency traders (HFTs) by increasing penalties on excessive order-to-trade ratios (OTRs).
What is OTR and Why is SEBI Concerned?
• OTR (Order-to-Trade Ratio) measures how many orders a trader places compared to how many actually get executed.
• High OTRs mean a large number of orders are placed but not executed, which can manipulate the market and slow down trading systems.
• SEBI wants to reduce unnecessary order flooding by penalizing traders who misuse this tactic.
New Penalty Structure Based on OTR Levels
• If traders place 50-500 orders for every executed trade, they will face a penalty of ₹5 per order.
• For 500-2,000 orders per trade, the penalty will be ₹20 per order.
• If the ratio exceeds 2,000 orders per trade, traders will be fined ₹50 per order.
• These penalties will be deducted from the trader’s daily turnover fees.
Impact on Market Players
• Regular traders and retail investors are unlikely to be affected since they don’t engage in high-frequency order placements.
• Algo and HFT traders will need to adjust their strategies to avoid heavy fines.
Why This Move?
• SEBI aims to create a fair trading environment by reducing unfair advantages gained through excessive order placements.
• The move is expected to improve liquidity, ensure smoother trade execution, and protect market integrity.
This regulatory step by SEBI ensures that traders who engage in manipulative practices by flooding the system with unexecuted orders will face consequences. The goal is to maintain a level playing field for all participants in the stock market.
Market works because of multiple participants working together or against each other. Removing one completely changes the dynamics, liquidity and as a result the outcomes associated.
This is exactly the problem with our country. People with zero knowledge or competency about the subject is making policies and banning any stuff they don’t understand. @Brishide
HFT trading in general helps market to be even more efficient and therefore more patterns and more levels work.
50K CR [500000000000] stolen from Retail Investors using HFT. Such technology serves no good to the society, whatever the theoretical advantages maybe.
Bro, NSE Co-location Scam was not about retailers, no retailer was affected.
Some institutions were getting micro-seconds advantage against other institutions.
No retailer can compete with that micro seconds accuracy.
Looks like ‘beby’ SHOULD BAN nse and bse and entire market this will solve all problems releted to participate. And legalized dabba trading because they provide # batter service than that of so call “protectors of retailers”
