Retail Algo Trading Validation Agency: BSE Official

Kolkata, Dec 16 (PTI) A performance validation agency is likely to be set up to verify claims made by algorithmic trading systems targeting retail investors, a stock exchange official said on Monday.

"There will be performance validation of claims by an agency—that is the idea," said BSE Ltd managing director and CEO Sundararaman Ramamurthy, addressing a session on capital markets organised by the Merchants' Chamber of Commerce.

Capital market regulator Sebi has proposed facilitating retail participation in algorithmic trading (algo trading), which currently benefits institutional investors.

In an effort to enhance market efficiency and transparency, Sebi introduced algo trading through the Direct Market Access (DMA) facility, which provided significant advantages like faster order execution, reduced transaction costs, greater transparency, better audit trails, and improved liquidity.


Sebi's proposal aims to provide retail investors with faster order execution and improved liquidity while ensuring safeguards are in place.

On Sebi's consultation paper regarding the ownership structure of clearing corporations (CCs), Ramamurthy said, "Regulations are evolving, and regulators co-create them with market participants."

He did not share any further insight on the subject.

Sebi, in its consultation paper, has proposed diversifying the ownership of CCs, currently wholly owned by stock exchanges. It has suggested pro-rata distribution of shares to existing shareholders of the parent exchange with a gradual reduction of holding, or a complete transfer of shareholding to the shareholders, enabling them to trade the shares freely. Sebi has extended the deadline for comments on the proposal to December 31.

Ramamurthy said BSE remains focused on expansion in the evolving capital market ecosystem. "We now have fire in our belly to grow the exchange and perform better," he added.