A pedestrian walks past an electronic ticker board that indicates stock figures at the Bombay Stock Exchange (BSE) in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

Charges For High Algo OTR To Be Imposed In Equity Segment From June 29

Leading exchanges BSE and NSE have said that charges for high algo order to trade ratio will be levied in the equity segment from June 29.

The bourses currently levy charges for high algo OTR in equity derivatives and currency derivatives segments.

Algorithmic or ‘algo’ trading refers to high-frequency and automated execution of trades on the stock exchanges through pre-programmed software platforms installed on servers.

Also read: SEBI Allows NSE, BSE To Offer Cross-Currency Derivatives

“Trading members are hereby informed that along with equity derivatives and currency derivatives segment, charges for high order to trade ratio shall also be levied in equity segment with effect from June 29, 2018,” the exchanges said in two separate but similarly worded communications dated June 22.

The charges will be computed at member level on a daily basis and collected on a monthly basis, after reckoning all algo orders and algo trades of the member, the Bombay Stock Exchange said in a notice.

For daily algo OTR of less than 50, there will be no charge. In case it is from 50 to less than 250, the amount will be two paise per algo order. The daily algo OTR from 250 to less than 500 will attract 10 paise per order, while a similar amount will be charged if it is 500 or over.

"In case the OTR is 500 or more during a trading day, the concerned trading member shall not be permitted to place any orders for the first 15 minutes on the next trading day as a cooling-off action and shall be able to place orders only after 15 minutes of the normal market opens in equity segment," BSE said.

On several occasions in the past, SEBI has advised stock exchanges to put in place effective economic disincentives for high daily OTR of algo orders placed by members in order to ensure orderly trading in the market.

Also read: SEBI Strengthens Algo Trading Rules; Co-Location Facilities

In April, SEBI had come out with a direction to exempt the algo orders placed within 0.75 percent on either side of the last traded price from the framework for imposing a penalty for high OTR.

"There will be an additional penalty in form of suspension of proprietary trading right of the trading member for the first trading hour on the next trading day, in case a trading member is penalized for maintaining a high daily OTR, provided penalty was imposed on the trading member on more than ten occasions in the previous 30 trading days (on rolling basis)," the National Stock Exchange said in a circular.