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TMI BlogBroad Guidelines on Algorithmic Trading for National Commodity Derivatives ExchangesX X X X Extracts X X X X X X X X Extracts X X X X ..... one year from the date on which FCRA was repealed (September 29, 2015), or till such time as notified by SEBI, whichever is earlier. 2. In the past the erstwhile FMC from time to time had issued norms on Algorithmic Trading in consultation with the Exchanges. This circular is being issued to consolidate such norms in one circular. 3. Any order that is generated using automated execution logic shall be known as algorithmic trading. 4. The commodity exchanges shall have arrangements, procedures and system capability to manage the load on their systems in such a manner so as to achieve consistent response time to all members. The capacity of the trading system of the Exchange should be at least four times the peak order load encounter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ils to induct liquidity. 6. As mini and micro contracts are targeted towards small participants, while allowing algorithmic trading in mini and micro contracts Exchange should exercise caution and permit algorithmic trading only after taking into account liquidity in the contract and ascertaining that it will not put small participants in disadvantage. 7. Co-Location, Co Hosting or any other facility or arrangement which puts some members in disadvantageous position vis- -vis other members shall not be allowed. Algorithmic trading shall not be permitted from Exchange hosted CTCL terminals. 8. In order to ensure orderly trading in the market and fair usage of the trading platform by all the members, Exchanges shall put in place the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tify and initiate measures to impede any possible instances of order flooding by algorithmic trading. 9. The Exchanges shall place a limit on numbers of orders per second from a particular CTCL ID/ATS User ID not exceeding twenty orders per second. The limit of twenty orders per second from a particular CTCL ID/ATS User ID shall be measured over a rolling period of five seconds (i.e. hundred orders for 0th -5th second, hundred orders for 1st 6th second, hundred orders for 2nd to 7th second so on). For number of orders exceeding twenty per second the Exchanges shall prescribe economic disincentives and inform the same to the SEBI. 10. The exchanges shall ensure that all algorithmic orders are necessarily routed through members ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lgorithms. Further, in exigencies, the exchange should be in a position to shut down the member s terminal. 13. The exchange may seek details of algorithmic strategies to be used by the members for purposes of inquiry, surveillance, investigation etc. 14. Any event leading to slow down or trading halt or any other abnormal development shall be immediately reported to Integrated Surveillance Department of SEBI with full details. 15. The Exchanges shall ensure that the member shall provide the facility of algorithmic trading only upon the prior written permission of the exchange. While considering such approval, the exchanges shall ensure that the controls specified in these guidelines are fully implemented by the member. 16. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iii. CISM (Certified Information Securities Manager) from ISACA: iv. CISSP ( Certified Information System Security Professional) from International Information Systems Security Certification Consortium , commonly known as (ISC). d. Further, the exchange shall subject the member systems to more frequent system audits, as required. e. The members have the capability to set up and apply the necessary risk control checks at the individual order level and client level before each order generated by the algorithmic trading is released to the trading system and implements the following minimum level of checks: i. Daily Price Limit: Orders are not released in violation of the daily price limit defined in the contract specification or an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , orders, trades and data points emanating from trades executed through algorithm trading. v. The member shall obtain prior approval of the exchange on any modification or change to the approved algorithms or systems used for algorithms. The Exchange shall ensure conformance of such modified algorithms or systems also to the requirements specified in these guidelines. 19. The Exchange shall report details regarding algorithmic trading to SEBI in in its Monthly Development Report inter-alia incorporating turnover details of algorithmic trading , algorithmic trading as percentage of total trading, number of members/ clients using algorithmic trading, action taken in respect of dysfunctional algos, status of grievances if any, received a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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