Delhi High Court issues notice to Sebi on algorithm trading

The Delhi High Court has issued notices to capital markets regulator Sebi and stock exchanges on a petition filed by a broker and investors association which seeks a ban on high-frequency or algorithm trading The Securities and Exchange Board of India is required to file its response within six weeks. The matter has been posted for hearing on January 29, 2013.Algo trading has been in practice for the past couple of years and it was only recently Sebi proposed certain checks and balances for the system.The investor association seems to have claimed that such trading is against the right to equality and is not in the interests of market because only those with deep pockets could avail of such a facility.However, some sections of the market feel it is only an option for a retail investor and there is nothing that stops an investor from participating in securities market without algo trading, which is primarily meant for sophisticated investors, like institutions. Legal experts said the Supreme Court has time and again held that in the matters of policy, where well-laid down structures are prevalent, courts should think twice before entering into that area, especially involving expert regulators.BSE had cancelled all the Mahurat trades in October last year when it was revealed that000 of0000000 of buy and sell orders were orchestrated by a single Delhi-based trader.However, former Sebi member and advocate MS Sahoo does not expect a ban on algo trading, which he said is a facility for brokers for market efficiency and is not meant to give an undue advantage to one participant over another."The court is unlikely to consider a market microstructure that is an application of technology as it is not patently unfair," Sahoo said.