SEBI Current Affairs - 2019
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Market regulator Securities and Exchange Board of India (SEBI) has constituted Group to look into existing Institutional Trading Platform (ITP) framework and suggest measures to facilitate listing of startups. Its members include representatives from Indian Software Product Industry Round Table (iSPIRT), Indian Private Equity and Venture Capital Association (IVCA), Indus Entrepreneurs (TIE), law firms, merchant bankers and stock exchanges.
Terms of Reference of the Group
The group will look into existing ITP framework and suggest measures to facilitate listing of startups. It will revisit current ITP framework and identify areas, if any, which require further changes. It will also address issues relevant to ITP which group may like to assess. The group will submit report to SEBI within period of one month i.e. by July 2018.
Institutional Trading Platform (ITP) framework
ITP framework is window on stock exchanges where e-commerce, data analytics, bio-technology and other startups can list and trade on their shares. It allows companies to list without necessarily doing an Initial Public Offer (IPO) of equity. SEBI had introduced it in 2013 to facilitate listing of new age companies, but it had failed to gain any traction.
Benefits of listing on ITP
It facilitates capital raising by small and medium enterprises (SMEs) including start-up companies which are in their early stages of growth. It provides easier entry and exit options for informed investors like angel investors, Venture Capital Funds (VCFs) and Private Equities (PVs) etc. to and from such companies. It also provide better visibility and wider investor base. It also relaxes compliance and cost effective listing and provide tax benefits to long term Investors.
The Securities Exchange Board of India (SEBI) has relaxed algorithm trading norms at commodity derivatives exchanges. The market regulator has raised limit of trading using algorithm trading process up to 100 orders per second by user from the existing limit of 20 orders per second.
The decision was taken after receiving representations from exchanges along with views of SEBI’s subcommittee- Commodity Derivatives Advisory Committee. SEBI has asked exchanges to ensure that limit provided by it is subject to its ability to handle load. Besides, it also has decided to do away with requirement of empanelment of system auditors by the exchanges for system audit of algorithmic trading.
Algorithmic trading in financial markets refers to transaction orders generated by using advanced mathematical models that involves automated execution of trade. It uses mathematical models and software codes to make transaction decisions on exchanges and execute them at high speed.
This technology-driven trading enables traders to take advantage of any profit making opportunities arising in the market much before a human trader can even spot them. It was introduced in India in 2009. At present, on National Stock Exchange (NSE), algorithm trades accounts close to 16% of all trades. On the Bombay Stock Exchange (BSE), it was 8.56% in January 2017.
Difference between algo trading and high frequency trading (HFT)
Both are often used inter-changeably, but they are not really same. HFT refers to high-volume orders executed within split-seconds to make immediate gains from market opportunities. HFT trading are often backed by algo trading, which spot trading opportunity.