source : http://www.sebi.gov.in/cms/sebi_data/attachdocs/1470393485587.pdf
If the new rules come into place, will non algo traders and small investors benefit ? I think there will be lesser price volatility but the liquidity will come down, as most of the current limit orders are placed by algo trading. what is your take on this ?
One interesting proposal for retail traders is that they are considering providing Top 20/30/50 bid and ask rates in market depth instead of current 5.
Algo trading is a broad word, what SEBI is trying to address is the high frequency trading bit. Also I don’t think retail traders will be able to get more than 5 bids as the cost of tick by tick data is prohibitive and so much data can’t really be sent through internet to clients.
High frequency trading adds liquidity and hence ensuring lesser volatility. If the liquidity goes away, volatility is bound to increase.
With almost 40% of exchange turnover coming through HFT, if tomorrow this volume suddenly disappears, not good for anyone.
Btw, SEBI has just opened up this topic for discussion. They will take the final decision in the next few months.