Sebi strengthens algo trading rules; co-location facilities

In order to facilitate small and medium sized trading members, Sebi on Monday asked stock exchanges to introduce managed co-location services', wherein space will be provided to vendors along with technical knowhow and other expertise.

Besides, the regulator has taken a number of measures to strengthen algo trading framework, including providing some services for free, the Securities and Exchange Board of India (Sebi) said in a circular.

The decision has been taken after receiving public comments and in consultation with Sebi's two panels -- Technical Advisory Committee and Secondary Market Advisory Committee.

The regulator noted that small and medium sized trading members, find it difficult to avail co-location facility, due to various reasons, including high cost, lack of expertise in maintenance and troubleshooting.

Under the managed co-location facility, space/rack will be allotted to eligible vendors by the stock exchange along with provision for receiving market data for further dissemination of the same to their client members and the facility to place orders (algorithmic or non-algorithmic) by the client members from such facility.

The vendors will provide the technical knowhow, hardware, software and other associated expertise as services to trading members and will be responsible for upkeep and maintenance of all infrastructure in the racks provided to them.

Stock exchanges will supervise and monitor such facilities on a continuous basis. Besides, exchanges will be responsible and accountable for actions of vendors providing managed co-location services and ensuring integrity, security and privacy of data, being handled at the facility.

Further, in order to have fair competition, exchanges have been asked to ensure that multiple vendors are permitted for providing such services at their co-location facility.

Co-location is a facility provided by exchanges to trading members and data vendors, whereby their trading or data systems are allowed to be located within or at close proximity to the premises of the bourses.