India Has No Dedicated Monitoring System For High Frequency Trades: BSE

Mumbai: India stands out among developing economies in its adoption of high frequency trades (HFT) but it has no dedicated practices for differentiating or monitoring such complex automated systems, a top official of leading stock exchange BSE said on Monday.

"New financial products, trading venues, and advanced trading techniques (such as algorithmic and HFT) are making capital market surveillance increasingly challenging and complex for regulators across the world," BSE managing director and CEO Ashishkumar Chauhan said.

"India has no dedicated practices for differentiating or monitoring complex automated systems (such as algorithmic and HFT)," he said, noting that the country stands out among developing economies in its adoption of HFT.

Mr Chauhan was addressing a seminar on capital markets organised by ICSI here.

HFT coupled with low latency networks "can exponentially increase the risks of market abuse, as market participants have the ability to trade numerous products and enormous volumes in the fraction of a second", Mr Chauhan said.

"In this case normal detection algorithms may be of no use, providing erroneous results, while a genuine case of market abuse may go unnoticed," he said.

Nearly 40 per cent of all trades in the country are done using HFT.

He noted that "intensive pattern analysis can accurately detect trading malpractices and market abuse".

"It has emerged as a major theme for research and is being increasingly used in advanced detection systems. Coupled with other capabilities such as Big Data analytics, it has become the backbone of near real-time and order level surveillance," the BSE CEO said.

Meanwhile, Securities and Exchange Board of India whole-time member Rajeev Kumar Agarwal said the markets need to mobilise more amount of foreign capital from overseas, and that the domestic stock markets would continue to give "bullish return".