Regulations
MONEYLIFE IMPACT: Regulators taking stock of the risky algo trading
Last month, Moneylife blew the whistle on high frequency or algo trading taking place in Indian stock markets by going public with a whistle-blowers report on how select investors fixed the system. Financial market regulators, RBI and SEBI are seriously looking at the risky algo trading that can jeopardise interest of retail investors 
 
Financial market regulators, Reserve Bank of India (RBI) and Securities and Exchange Board of India (SEBI) appears to have swung into action against the increasing influence of algorithm trading or high frequency trading (HFT). Last month, Moneylife wrote about algo trading or HFT in India that was possibly going on in National Stock Exchange (NSE). The article, published on 19th June reportedly seems to have alarmed and forced the regulators to take a closer look at gaps in the existing regulations and explore ways of strengthening them. Interestingly, SEBI and the National Stock Exchange (NSE) have maintained a deafening silence on the alarming disclosures in the whistleblowers letter despite multiple reminders by Moneylife before and after publishing the report. We wrote to the SEBI Chairman UK Sinha, NSE chairman Ravi Narain, and managing director Chitra Ramakrishnan seeking their reaction to the letter. 
 
The Financial Stability Report (FSR) for June 2015 released by RBI on 25th June, has warned against the rising popularity of superfast algorithm trading, saying its complex coding and ultra-low latency due to its advanced communication platforms increase risks of erroneous trades and manipulations in stock markets. Further, the fact that the share of algo orders in total orders and the share of cancelled algo orders in the total number of cancelled orders is around 90% creates concerns relating to systemic risks, the FSR says.
 
According to the report, volumes in algo trading and HFT have increased substantially over the past few years in the cash segment to about 40% of total trades by March 2015 on both exchanges from 17% on NSE and 11% on BSE in 2011. The report is a collective assessment of a sub-committee of the Financial Stability and Development Council that includes all financial market regulators.
 
 
The report also pointed fingers at certain instances of abnormal market movements in Indian stocks, which have been attributed, by market experts, to algo trading or HFT. 
 
On 6 May 2015, the S&P BSE Sensex and NSE's CNX Nifty fell by over 2% wiping out their entire gains for the year, because of strong selling on algo trading platforms, says a report from Reuters. (http://in.reuters.com/article/2015/05/06/markets-india-stocks-idINKBN0NR0D820150506)
 
Moneylife has repeatedly argued that India has no system of monitoring complex automated systems, leave alone complex trading systems which are based on complex mathematical algorithms. Consequently, organisations that operate such technology have become a law unto themselves, supervised by nobody. Even when there is a major glitch or a fat finger trade, no report is put into the public domain. 
 
Moneylife has a detailed document that came by snail mail from Singapore and addressed to Mr BK Gupta, DGM, SEBI. It is dated 14th January 2015 with a copy to Sucheta Dalal. It is not clear what SEBI has done with it in all these months.
 
According to media reports, SEBI is working on rules to regulate algo trading. Quoting two sources familiar with the matter, a report from Business Standard, says,"...among the points under consideration are means to slow down the pace of trading through introduction of measures, including a minimum resting time for orders before execution, and randomising the time priority of orders an exchange receives."
 
"To eliminate 'fleeting orders' or those that appear and then disappear within a short period, a mechanism might be introduced to prevent cancellation or modification of an order until sometime from its submission. We are mulling to introduce a minimum resting period of 500-600 milliseconds," one of the sources told the newspaper.
 
In April 2008, algo trading was introduced in India with the advent of direct market access (DMA). Though these trades are monitored by SEBI, the FSR report expressed apprehensions that they could result in market manipulation.
 
Earlier in January, SEBI tightened controls on its circuit breaker mechanism, in addition to the existing coordinated trading halt in all equity and equity derivative markets nationwide on 10%, 15% and 20% movement either way of the Sensex and the Nifty. 
 
Michael Lewis’s best-selling book, 'Flash boys: A Wall Street Revolt', published in March 2014, has triggered a global debate on algo or high frequency trading. The book discusses rise of high frequency trading in US equity markets and argues that the US markets are rigged by the HFT traders.

User

COMMENTS

N Kanitkar

2 years ago

I have noticed something similar when i placed orders in equities. When you look at the 'Best 5 bids and offers' for that stock and placed a buy order with say a price 20 paise more than the highest bidder, an order would appear 05 paise more than mine. So i decided to play it for a while. I kept moving my price up and down but the other order would automatically place an order 05 paise more than mine. It was unnerving.

This is not possible unless i have automated monitoring systems i guess.

V ganesan

2 years ago

The best solution is Ban futures and options in individual stocks.If iam right stock futures derivatives is available only in INDIA.othercountries are having only INDEX FUTURES .My request to RBI SEBI NSE BSE GOVT OF INDIA to look into this very seriously.Thanks for MONEYLIFE EFFORTS AND TO RECOMMEND THE concerned authorities to allow ONLY index futures and options for risk control .Refer my earlier coomment in your article dated 19 th june .Again tahaks.

REPLY

Sunil Rebello

In Reply to V ganesan 2 years ago

The Ban in FNO for individual stocks is necessary - why are we allowing FNO for individual stocks?
i can only think of one reason - our political masters want to wash their BLACK earnings via the Indian Stock market.
Pray that enough pressure is put to ban FNO for individual stocks in INDIA also

CAIT launches national campaign against proposed GST
It has been proposed that there will be two types of GST i.e. central GST and state GST and both CGST and SGST will have to be charged in each transaction and separate sales return needs to be filed with two separate departments by the traders
 
Praveen KhandelwalThe Confederation of All India Traders (CAIT) has strongly opposed the proposed Goods and Services Tax (GST) in India which has dual tax and three monitoring authorities. "The proposed GST runs counter to ease in doing business vision of Prime Minister and therefore, the CAIT has launched a nationwide campaign to oppose GST proposals. We demand single tax GST with single authority coupled with uniform Act and tax rates across the country and develop India on a concept of ‘one Mandi’. “The stakeholders cannot be taken as granted and proposed form of GST is not acceptable to us”-said Praveen Khandelwal, Secretary General of CAIT.
 
As a part of its national campaign, the CAIT held a Traders Conference at New Delhi, which was attended by representatives of trade, transporters, SMEs, consumers, hawkers and other segments of trade, which were chaired by CAIT National President BC Bhartia. The CAIT intends to hold such conferences in 40 cities of different states within next two months’ time. Already similar conferences have been held at Mumbai and Navi Mumbai in past week.
 
It has been proposed that there will be two types of GST i.e. central GST and state GST and both CGST and SGST will have to be charged in each transaction and separate sales return needs to be filed with two separate departments by the traders. The inter-state sales will be governed by IGST, a third authority to be constituted by GST council. In present, VAT taxation system, there is only one authority, which regulates the entire taxation structure.
 
Levy of 1% additional tax on inter-state sales for which no input credit will be allowed to traders is another problematic issue which runs counter to principle of full transfer of tax. "Though traders are expected to perform as revenue getters with utmost efficiency but so far government has not initiated any step to hold consultations with stakeholders"-said BC Bhartia, National President, CAIT.
 
Both Bhartia and Khandelwal called upon the government to begin talks with stakeholders and said that on the pattern of National Academy of Direct Taxes, a National Academy of Indirect Taxes should be formed where tax officials should be trained. A separate civil services cadre for taxation like Indian Taxation Service like IAS or IPS may be formed to monitor taxation structure in India.
 

User

COMMENTS

Hemen Parekh

2 years ago

If You cannot lick them ; Join them



CAIT stands for Confederation of All India Traders

It has over 4.5 million retailers as its members

Till a few weeks back , CAIT was opposed to e-commerce in retail trade

But when it realized that the e-Commerce tide was unstoppable , it decided to join it !

Recently , CAIT General Secretary , Khandelwal said :


" E-commerce is a reality. We cannot be blind to it. Through ‘e-Lala’, our aim is to retain consumers who were traditionally with brick-and-mortar outlets but are now shifting away to online stores

We are being forced by circumstances to get into this. We have to move with the times ”


By October 2015 , CAIT plans to launch its own e-Commerce portal " e-Lala" to take on the likes of Amazon / Flipkart / Snapdeal / Myntra etc

But unlike these existing e-Commerce portals , CAIT does not have a war-chest of billions of dollars , to

> Set up Fulfillment Centers ( Warehouses ) all over the country

> Advertise online / offline , in a big way


But when you have 4.5 million Fulfillment Centers ( of course small ) , spread all over the entire country , covering every street , then why do you need to build central warehouses ?

And when 10 million delivery boys / girls , deliver a billion packages every day to millions of households , with a plastic bag / card-box carton that reads " YOUR e-LALA DELIVERY " , then why do you need to waste money on advertising ?


Now the bad news :

> How will e-Lala control the quality of products being delivered by 4.5

million retailers ?

> How will it ensure timely delivery ?

> How will it ensure that Member-Retailers do not overcharge ?

> Existing e-Commerce portals buy in bulk , directly from the manufacturers ; then offer heavy discounts over the printed MRP . How will e-Lala counter this ?


> Today , barely 5 % of the retail buyers , pay thru Credit Cards . 95 % pay in cash

If e-Lala insists on advance payment using Credit Card thru a online Payment Gateway , will this put-off buyers from using e-Lala portal ?

Again , today , almost all buyers pay " Cash Against Delivery " to their neighborhood retailer.

They may not like to pay in advance of the delivery !

> To- day , buyers do refuse to accept deliveries for various reasons , such as :

# Wrong product or labeling or package size or brand

# Expiry date exceeded or about to expire

# Even , change of mind !


All because , there is no online advance payment , and nothing is lost by refusing !

> To-day , buyers are even able to return the purchased goods to their neighborhood retailer , a couple of days later.

And the retailer usually accepts the " Return " , in order to retain the

client on a long-term basis - client whom , he knows personally !

This will not be easy to duplicate in E-Lala ecosystem !


This is not to say that CAIT's e-Lala experiment is doomed !


If anything , e-Lala would do well to think through these issues , then provide answers thru a FAQ page on its e-com web site


To help crystallize this thinking , it may not be too late even now , for CAIT to host: TRUE / FALSE : YES/ NO : MULTIPLE CHOICE : online Questionnaires , on its existing web site


One questionnaire for the End-Consumers and another one for its 4.5 million member retailers


In today's " Dog it Dog " world of e-commerce , one can neither dictate nor predict , a competitor's actions


That kind of wishful thinking just does not work


To stay two steps ahead of the Competitors , you need to think and decide :


" What am I going to do this morning ? "


-------------------------------------------------------------------------------------

hemen parekh

25 July 2015

B2BmessageBlaster








Hemen Parekh

2 years ago

If You cannot lick them ; Join them



CAIT stands for Confederation of All India Traders

It has over 4.5 million retailers as its members

Till a few weeks back , CAIT was opposed to e-commerce in retail trade

But when it realized that the e-Commerce tide was unstoppable , it decided to join it !

Recently , CAIT General Secretary , Khandelwal said :


" E-commerce is a reality. We cannot be blind to it. Through ‘e-Lala’, our aim is to retain consumers who were traditionally with brick-and-mortar outlets but are now shifting away to online stores

We are being forced by circumstances to get into this. We have to move with the times ”


By October 2015 , CAIT plans to launch its own e-Commerce portal " e-Lala" to take on the likes of Amazon / Flipkart / Snapdeal / Myntra etc

But unlike these existing e-Commerce portals , CAIT does not have a war-chest of billions of dollars , to

> Set up Fulfillment Centers ( Warehouses ) all over the country

> Advertise online / offline , in a big way


But when you have 4.5 million Fulfillment Centers ( of course small ) , spread all over the entire country , covering every street , then why do you need to build central warehouses ?

And when 10 million delivery boys / girls , deliver a billion packages every day to millions of households , with a plastic bag / card-box carton that reads " YOUR e-LALA DELIVERY " , then why do you need to waste money on advertising ?


Now the bad news :

> How will e-Lala control the quality of products being delivered by 4.5

million retailers ?

> How will it ensure timely delivery ?

> How will it ensure that Member-Retailers do not overcharge ?

> Existing e-Commerce portals buy in bulk , directly from the manufacturers ; then offer heavy discounts over the printed MRP . How will e-Lala counter this ?


> Today , barely 5 % of the retail buyers , pay thru Credit Cards . 95 % pay in cash

If e-Lala insists on advance payment using Credit Card thru a online Payment Gateway , will this put-off buyers from using e-Lala portal ?

Again , today , almost all buyers pay " Cash Against Delivery " to their neighborhood retailer.

They may not like to pay in advance of the delivery !

> To- day , buyers do refuse to accept deliveries for various reasons , such as :

# Wrong product or labeling or package size or brand

# Expiry date exceeded or about to expire

# Even , change of mind !


All because , there is no online advance payment , and nothing is lost by refusing !

> To-day , buyers are even able to return the purchased goods to their neighborhood retailer , a couple of days later.

And the retailer usually accepts the " Return " , in order to retain the

client on a long-term basis - client whom , he knows personally !

This will not be easy to duplicate in E-Lala ecosystem !


This is not to say that CAIT's e-Lala experiment is doomed !


If anything , e-Lala would do well to think through these issues , then provide answers thru a FAQ page on its e-com web site


To help crystallize this thinking , it may not be too late even now , for CAIT to host: TRUE / FALSE : YES/ NO : MULTIPLE CHOICE : online Questionnaires , on its existing web site


One questionnaire for the End-Consumers and another one for its 4.5 million member retailers


In today's " Dog it Dog " world of e-commerce , one can neither dictate nor predict , a competitor's actions


That kind of wishful thinking just does not work


To stay two steps ahead of the Competitors , you need to think and decide :


" What am I going to do this morning ? "


-------------------------------------------------------------------------------------

hemen parekh

25 July 2015

B2BmessageBlaster








Maruti Suzuki's June sales up 2 percent
Automobile manufacturer Maruti Suzuki on Wednesday reported an increase of 1.8 percent in its total sales for June which stood at 114,756 units -- up from 112,773 units sold in the corresponding month of 2014.
 
According to the company, domestic sales during the month under review rose by 1.6 percent at 102,626 units from 100,964 units sold in June, 2014.
 
Exports during June grew by 2.7 percent at 12,130 units from 11,809 units shipped out during the corresponding month of 2014.
 
The sales of passenger cars segment, which comprises brands like Alto, WagonR, Swift, Ritz, Celerio, Dzire, Dzire Tour, SX4 and Ciaz, inched up by 0.5 percent at 86,630 units from an off-take of 86,223 units in the corresponding month of last year.
 
The off-take of utility vehicles comprising of brands like Gypsy, Grand Vitara and Ertiga rose by 10.6 percent at 5,531 units from sales of 5,003 units in June, 2014.
 
The sales of van segment, which includes Omni and Eeco, increased by 7.5 percent at 10,465 units from an off-take of 9,738 units in the corresponding month of previous year.
 
The company's scrip at the Bombay Stock Exchange (BSE) was trading up 0.64 percent or 25.55 points at Rs.4,048.25 per equity share around 2.00 p.m. from its previous close of Rs.4,022.70.

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