Well the answer is, there is no clear and simple road for the automation in india. There are registered vendors whose charges are very high and unregistered vendors whose charges is very limited.
For algo we need vps or cloud services also.
Unfortunately for the retail the route to algo is not very easy and most of the vendors lack basic facility.
First thing to know about automating a strategy is that it is not allowed for a retail trader by the regulators. Why not? hmm..Because regulators feel that Indian retail is not mature enough to handle automation, when a small change in the code of the strategy can be very damaging.
But if you need to automate here is the process:
- You need to first have a strategy that makes money, and this can be done by coding it and then backtesting/paper trading. To be able to code a strategy, you will need an interface like an Amibroker, Metastock, Multicharts, and others and then code using the respective scripting language. Some people also build custom UI which can use C#, .NET and other popular languages to code strategies. Cost for AMI, Meta, and others are around Rs 20k, you will also need data feeds which might cost between 2k to 4k per month.
- Register as an authorized person with the exchange through a brokerage firm. You need to do this, so that you can get dealer terminal access which is mandatory for automation. The cost based on which broker, might vary between 6k to 20k for registration on the exchange. The cost of dealer terminal might vary between Rs 500 to 5k per month.
- If the strategy is built on custom UI, you will need API access from the brokerage you are trading. The cost could be between 10k to 15k per strategy per month.
- If the strategy is written on AMI, Meta and others, you will still need an API to send the orders to the dealer terminal. You will need to find out from your brokerage, if they have such API, and the cost.
- You will need to speak to your brokerage now, and get the strategy approved at the exchange by participating in mock trading. Brokerage might charge you between 3 to 10k for this, which will also include an auditors certificate.
- The brokerage might charge you between Rs 3k to Rs 15k per month for providing this solution.
Phew... I couldn't really keep this short, but the costs are pretty restrictive for a retail trader to automate unless he is a HNI. Need of the hour in India is a trading solution where you can write advance strategies on the trading platform itself, and be able to automate. There will still be costs, but would be a lot more convenient.
Algo trading has been in existence for more than a decade in the Indian financial markets, although their usage has been limited to a few hedge funds and portfolio managers. However, over the last couple of years, retail participation has increased dramatically. the IT arm of the National Stock Exchange (NSE), about a third of exchange trades in India are carried out using Algo trading
Who can implement algo trading in India?
All traders and investors, right from individuals to hedge funds are permitted to use programmed or algo trading.
If human intervention to execute trades is part of the program, exchange approvals are not mandatory. However, if trading is carried out using robots, where manual intervention is not required, prior approvals from the respective exchanges are necessary
Trading tools that can be integrated to algo platforms in India
The most widely used charting softwares to trade algos in India are
- Nest pulse
- Traders Cockpit
- Trade Station
And Yes, fully automated trading for Individual Traders is possible with low cost.
I would like to know if automated trading is legal in India or not. If not, is there any way for the authorities to find out if a person was doing automated trading? I’ve heard that brokers keep track of IPs from which each order is fired, so if this IP doesn’t belong to the place I live in (but in the same city), will that be a legal issue?
Automated Trading by Retail Traders is not explicitly allowed by the exchanges as of today. On the other hand, Exchanges has laid out guidelines on how to get your strategy approved for automated trading. Automated Trading is not legal, unless your strategy is approved by the exchange. Full Stop.
YES. By analyzing the frequency of your order execution, the exchanges can flag automated order executions.
It is not necessary they catch you today, but you cannot rule out the possibility that may be after 5 years when they audit the data, you might still be liable for placing orders to the exchange which violate the terms of your Membership.
NO. Unless you are flagged for violating the automated trading policies of the Exchange.
How to do this? What are the costs and paperwork involved in this?
I’m not planning to develop a high frequency trading system. It will be for single minute chart, so in a day it might fire 5 to 15 trades only.
Has anything changed on this matter over these years? Or a retail trader is still deprived of algo trading? Can I simply use Zerodha’s APIs to automate trades?