Automated or algorithmic trading is allowed in India only for specific traders who are heavy weights and have a say in the market and small investors or traders can not use it. It is a software- based trading which was allowed by Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) in 2005.
To make it simple we can say that it is a system for trading through a programmed software that can make around 800 transactions per second.
Disadvantages
- The algorithm trading system "discriminates between rich and influential brokers and common investors/ retail investors and creates inequality and finally casts a deceptive data to common investors and retail investors while trading in shares and securities on online trading platforms of BSE and NSE".
- Algorithmic trading "creates unfair advantage" to members who use the software against ordinary investors.
Action Plan
A group of investors have approached court and Delhi High Court is in process of issuing orders to SEBI to stop such discriminatory practices.
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