Executive Summary:
This circular, effective April 1, 2022, revises the Orders Per Second (OPS) limit for algorithmic trading in the Commodity Derivatives Segment of Stock Exchanges. It allows exchanges to increase the OPS limit from 100 to 120, subject to certain conditions. Further relaxation beyond 120 OPS requires SEBI approval and infrastructure upgrades.
Key Points / Main Content:
Revised OPS Limit:
* The OPS limit for algorithmic trading is increased to 120 from a particular CTCL ID/ATS User ID.
* Compliance is measured over a rolling 5-second period (5X orders, where X is the exchange-set limit, not exceeding 120).
* Economic disincentives must be prescribed for exceeding the exchange-set limit (X).
* The Stock Exchange shall ensure that the limits provided is subject to its ability to handle the load.
Further Relaxation of OPS Limit:
* Exchanges can further relax the 120 OPS limit based on peak order load and infrastructure upgrades, subject to SEBI approval.
* Trading system capacity must be at least four times the peak order load.
Other Conditions:
* All other terms and conditions specified in circular no. SEBI/HO/CDMRD/DMP/CIR/P/2016/97 dated September 27, 2016 and SEBI circular no. SEBI/HO/CDMRD/DRMP/CIR/P/2018/60 dated April 03, 2018, remain unchanged.
Impact Analysis:
Stock Exchanges:
* Impact: Stock Exchanges need to implement the revised OPS limit of 120. They can relax the limit further after upgrades and with SEBI approval. They must also define economic disincentives for exceeding the limit.
* Action Required: Update systems to accommodate the new OPS limit. Define economic disincentives. Assess infrastructure capacity and upgrade if needed. Seek SEBI approval for further relaxation of the OPS limit.
Algorithmic Traders (CTCL ID/ATS UserID):
* Impact: Algorithmic traders can potentially execute more orders per second.
* Action Required: Adjust trading strategies to take advantage of the increased OPS limit, while ensuring compliance with exchange-defined limits and economic disincentives.
SEBI:
* Impact: SEBI will oversee the implementation of the revised OPS limits and approve further relaxations by stock exchanges.
* Action Required: Review and approve requests from Stock Exchanges for further relaxation of OPS limits.
Key Entities Referenced
Securities and Exchange Board of India (SEBI): Regulatory body for securities and commodity markets in India.
Commodity Derivatives Segment: A specific segment of the stock exchange dealing with commodity derivatives trading.
Stock Exchange: Refers to all exchanges having Commodity Derivatives Segment
Algorithmic trading: Trading using computer programs that automatically execute trades based on pre-defined instructions.
Orders Per Second (OPS): A measure of the speed of trading, specifically the number of orders that can be processed in one second.
CTCL IDATS UserID: Identifier for users accessing the trading system through Computer-to-Computer Link (CTCL) or Internet-based Trading System (IDATS).
Technical Advisory Committee of SEBI: A committee advising SEBI on technical matters related to the securities and commodity markets.
Securities and Exchange Board of India Act, 1992: The governing law that establishes SEBI and defines its powers and functions.
CIRCULAR
SEBI/HO/CDMRD/CDMRD_DRM/P/CIR/2022/30 March 17, 2022
The Managing Directors / Chief Executive Officers
Of All Exchanges having Commodity Derivatives Segment
Sir / Madam,
Subject: Revision in Orders Per Second limit for algorithmic trading in Commodity
Derivatives Segment of the Stock Exchange
1. SEBI had issued broad guidelines on algorithmic trading for Commodity
Derivatives segment of Stock Exchanges vide SEBI circular no.
SEBI/HO/CDMRD/DMP/CIR/P/2016/97 dated September 27, 2016. The circular
inter-alia required Stock Exchange to place a limit on the number of orders per
second (OPS) from a particular CTCL ID/ATS User-ID to twenty (20) OPS. The limit
on number of OPS from a particular CTCL ID/ATS User–ID was relaxed upto
hundred (100) OPS from twenty (20) OPS, vide SEBI circular no.
SEBI/HO/CDMRD/DRMP/CIR/P/2018/60 dated April 03, 2018.
2. Based on representations received from Stock Exchanges and discussions in the
Technical Advisory Committee of SEBI, it has been decided to permit Stock
Exchanges to further relax the aforesaid limit upto one hundred and twenty (120)
OPS, as against the present hundred (100). Thus, clause ‘3’ of SEBI Circular
SEBI/HO/CDMRD/DRMP/CIR/P/2018/60 dated April 03, 2018 stands revised as
follows-
“The Stock Exchange shall place a limit (X) on the numbers of orders per second from
a particular CTCL ID/ATS User-ID not exceeding one hundred and twenty orders per
second. Compliance with the limit “X” so set by a particular CTCL ID/ATS User-ID
shall be measured over a rolling period of five seconds (i.e., 5X orders for 0th – 5th
second, 5X orders for 1st-6th second, 5X orders for 2nd to 7th second and so on). For
number of orders exceeding the limit (X) set by the Stock Exchange, the Stock
Exchange shall prescribe economic disincentives and inform the same to SEBI.
Further, Stock Exchange shall ensure that the limits provided is subject to its ability
to handle the load.”
3. The limit on OPS may be further relaxed by the Stock Exchanges based on the
increased peak order load observed and corresponding upgrade of infrastructure
capacity to ensure that the capacity of trading system of the Stock Exchange
remains at least four times the peak order load. The relaxation in limit shall be
subject to approval of SEBI.
4. The circular shall be effective from April 01, 2022.
Page 1 of 25. All other terms and conditions specified in circular no.
SEBI/HO/CDMRD/DMP/CIR/P/2016/97 dated September 27, 2016 and SEBI
circular no. SEBI/HO/CDMRD/DRMP/CIR/P/2018/60 dated April 03, 2018 shall
remain the same.
6. This circular is issued in exercise of the powers conferred under Section 11 (1) of
the Securities and Exchange Board of India Act, 1992, to protect the interests of
investors in securities and to promote the development of, and to regulate the
securities market.
7. The circular is issued with the approval of the competent authority.
8. This circular is available on SEBI website at www.sebi.gov.in.
Yours faithfully,
Priyanka Mahapatra
Deputy General Manager
Division of Risk Management
Commodity Derivatives Market Regulation Department
priyankam@sebi.gov.in
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