High frequency trading india
India has made significant investments in the technology stack and risk management systems that go along with sophisticated electronic trading. Considering that direct market access was established ingreat strides have been made in the space of automated and high frequency trading over the last six years.
Eastspring Investments, one of Asia's largest fund managers, trades all emerging markets across a diverse range of asset classes. Eastspring has an eight-person dealing desk covering equities, fixed income, FX and derivatives. Consequently, said Sanjay Awasthi, a director based in Singapore, the firm faces extremely dynamic trading environments. The stock markets, its mechanisms and microstructure, high frequency trading india and will continue to develop as the economy evolves," he said.
India has a significant local arbitrage community that trades cash futures, and profits from inter-exchange arbitrage. It started off with local traders, but now there are an increasing number of prop desks at brokers and banks high frequency trading india in, Awasthi said.
More asset classes are on offer too, such as FX and fixed income, particularly government bonds and interest rates. Single stock futures meanwhile continue to be very popular. The majority of retail, a lot of speculative activity, happens in SSFs," said Awasthi. Anybody trading India needs to be acutely aware, therefore, of how the relationship between cash and futures changes over various periods of time, he noted, adding that to trade these markets effectively means not only understanding them, but also remaining agile and adaptive to any changes or developments.
Awasthi, who is a former regulator for India's markets watchdog, the Securities and Exchange Board of India, said: Any measure that enhances liquidity is great, provided it is adequately regulated and everybody is kept at par. India high frequency trading india not "even come close to" having the same problems with HFT as developed markets, and he sees more and more institutions, both domestic high frequency trading india foreign, actively using algos in India.
This is a welcome and much needed development," he added. Today, algorithmic trading, including HFT, accounts for a third of the total volume on cash markets on the BSE, the oldest stock exchange in Asia. In the derivatives markets, algorithm trading is approaching half of the high frequency trading india trading volume. Similarly people used to go to human high frequency trading india tellers, now they go to the ATM.
The activity that gives you faster access and faster execution, people will move on to that," he said. For stock exchanges, that has meant floor-based activity giving way to screen-based activity. A major reason for the surge in volume is a partnership agreement with Deutsche Boerse T7 platform, also used by Eurex. This has allowed them to handleorders high frequency trading india second, with a response time of under microseconds, making them India's fastest exchange.
Alongside that, the BSE is focused on continuously improving speed, cost, and functionality that caters to tech-savvy, algo-driven clients. They have eliminated caps on the number of orders per minute and also high frequency trading india an incentivised market making programme for high frequency trading india derivatives, mainline indices, futures and options and 30 single-stock baskets. By the second quarter, they also plan to allow equity single stock market making.
Currency and interest rate derivatives will not be supported due to regulatory reasons. In contrast to mature exchanges, there is no obligatory market making on the BSE. Instead, participants provide liquidity on a day-to-day basis. On days in which they fulfil their quoting obligation, BSE reimburses them all financial transaction taxes and regulatory fees. Over fifty brokers use the BSE's colocation infrastructure, which has no "predatory pricing".
It is also the only exchange in India to provide functionality high frequency trading india prevents self-trades. Allowing parties to cross with themselves, meaning the same party is responsible for both sides of the trade, can indicate artificial volume or interest, and the BSE surveillance systems clamp down on this. Its biggest problem remains that the NSE has more liquidity, thereby making it more attractive to a high frequency trading india subset of brokers, particularly those that do not use a smart order router.
NSE declined to be interviewed for this feature. Shrinivas Viswanath, co-founder and head high frequency trading india technology at RKSV, a three-year old discount broking firm, said that praise is due for how execution on High frequency trading india exchanges has improved over the course of the last five years.
To begin with, it is expensive: SEBI has appealed to the government to reduce or restructure this tax. BSE's Chauhan has echoed this sentiment in budget requests. One of high frequency trading india most significant changes in the India market, from a long-only perspective, has been the emergence of Liquidnet's dark pools services, Eastspring's Awasthi said, adding that "this was needed and could potentially change the way large institutions trade in India".
For now however, Viswanath doesn't see the internal demand. Having access to multiple venues, globally, is a major advancement necessary for India to compete with global markets, said Anand Maliwal, CTO at Destimoney Securities. However, in its present shape, market making on the BSE is a zero sum game. While conceding that regulators are still learning, the way they go about the business is "haphazard", said Maliwal. Both the NSE and BSE have index-based, market-wide circuit breakers in place sinceand since latethe circuit breakers are triggered by movement in either of the two exchanges.
This is already happening. High frequency trading india is optimistic and expects the HFT side of Destimoney's business to double in the next three years. To this effect, high frequency trading india firm is holding seminars, closed meetings and training sessions with clients. SinceLares Softech, a private asset management SEBI-registered hedge fund banc de binary trial account development and prop trading firm, has specialised in the algorithmic and HFT trading space in Indian markets.
It also has a presence in Dubai, Singapore and various other countries. All software is built in-house with the focus on ultra-low latency. Brijeshwar Patel, director at Lares Softech, said: Depending on the strategy, they can take up to a month to respond.
As the data from exchanges get more refined and speeds improve, along with enhancing its corporate management system high frequency trading india a system that keeps checks on positions - and risk management system, Lares Softech is investing in machine learning and FPGA Field Programmable Gate Arrays technology to increase volumes. It has only three clients, but its focus is predominantly on proprietary algorithmic and high frequency trading.
But with expectations that HFT is going to kick off in the next year or two, technology providers are eyeing the Indian market as a major opportunity. Clients include prop trading firms, top ten banks, and large international investment brokers.
There is a barrier to entry. The idea, for us, is to streamline and make it easier for companies to do low latency trading. Essentially, you provide them with the platform to accelerate the flow," he said. FPGA is capable of handling 20 million messages per second; over 32, connections; and has a latency of under 0. ETFs and indices are priced in nanoseconds.
Shah is optimistic, and believes that market making will "take off in a big way" over the next two years. With this new protocol and FPGA, we are talking of latency less than 1 microsecond. The fact is, using FPGA, you can be assured that your order reaches the exchange faster than your competitors. You just need to decide the correct time to send the order considering the rate limit rules.
All it takes is someone to come up with an engineering solution to high frequency trading india the markets more reliable," he added. The companies are expected to keep growing the HFT business and are investing heavily in technology and systems reliability; after all, the onus is on them to ensure algorithms don't go rogue.
It's safe to say this business isn't going away. Bob Mudhar, associate partner at Citihub Consulting, said that the only two real pre-requisites for high frequency trading are that markets need to be liquid and order driven. Even so, the legacy of HFT was forged in low latency. And across the world, that's changing. Clients will stay sticky to those firms that provide the best availability and also recover best when there is a failure.
India is no different. So, even while the exchanges, participants, and regulators are finding their footing, it's still a nascent industry. But the economy and timing seem to be in India's favour for development to flourish. O'Brien to high frequency trading india Fidessa's futures and options workstation to institutional clients Anand Maliwal, Destimoney Securities.
Bob Mudhar, Citihub Consulting.