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TMI BlogBroad Guidelines on Algorithmic TradingX X X X Extracts X X X X X X X X Extracts X X X X ..... road guidelines for algorithmic trading in the securities market. Definition 3. Algorithmic Trading Any order that is generated using automated execution logic shall be known as algorithmic trading. Guidelines to the stock exchanges and the stock brokers 4. Stock exchanges shall ensure the following while permitting algorithmic trading: (i) The stock exchange 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 stock brokers. The stock exchange shall continuously study the performance of its systems and, if necessary, undertake system upgradation, including periodic upgradation of its surveillance system, in order t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g advising the member, to shut down such algos and remove any outstanding orders in the system that have emanated from such dysfunctional algos. Further, in exigency, the stock exchange should be in a position to shut down the broker s terminal. (v) Terminals of the stock broker that are disabled upon exhaustion of collaterals shall be enabled manually by the stock exchange in accordance with its risk management procedures. (vi) The stock exchange may seek details of trading strategies used by the algo for such purposes viz. inquiry, surveillance, investigation, etc. (vii) The stock exchange shall include a report on algorithmic trading on the stock exchange in the Monthly Development Report (MDR) submitted to SEBI inter-alia incor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Further, the stock exchange shall subject the stock broker systems to more frequent system audits, if required. 6. The stock broker, desirous of placing orders generated using algos, shall satisfy the stock exchange with regard to the implementation of the following minimum levels of risk controls at its end - (i) Price check Algo orders shall not be released in breach of the price bands defined by the exchange for the security. (ii) Quantity check Algo orders shall not be released in breach of the quantity limit as defined by the exchange for the security. (iii) Order Value check - Algo orders shall not be released in breach of the value per order as defined by the stock exchanges. (iv) Cumulative Open Order V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aintain logs of all trading activities to facilitate audit trail. The stock broker shall maintain record of control parameters, orders, trades and data points emanating from trades executed through algorithm trading. (v) The stock broker shall inform the stock exchange on any modification or change to the approved algos or systems used for algos. 9. The stock exchange, if required, shall seek conformance of such modified algo or systems to the requirements specified in the circular. 10. Stock exchanges are directed to: (i) take necessary steps and put in place necessary systems for implementation of the above within a period of one month from the date of this circular. (ii) make necessary amendments to the relevant bye-laws, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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