Algo trading norms welcome but risks higher, say analysts

INCREASED COMPLIANCE BURDEN ON BROKERS AND EXCHANGES A WORRY

- ANANYA GROVER

THE SECURITIES AND Exchange of India's (Sebi) latest regulatory framework for algorithmic (algo) trading has evoked mixed feeling from the broking community and analysts.

While the regulations are seen as a welcome move, simply because retail investors will be encouraged to take the formal route towards algo trading instead of dabbling in unregistered products pushed by finfluencers, there are concerns over exchanges' approval process, higher risk involved and lack of education.

Most of the profits made by foreign portfolio investors and proprietary traders last year were via algo-trading. It reportedly makes up 70% of the total volume on the exchanges. For retail investors to get entry into this market is a double-edged sword - they could make big money or lose everything. The comfort, therefore, lies in the fact that it will be properly regulated for even high risk-takers.