NSE changes algorithm approval process

The National Stock Exchange (NSE) has revised the approval mechanism for tools and mathematical models used by brokers for efficient and speedy clearance through algorithmic trading.

“Trading members have made a representation to the exchange to make the process smooth and to facilitate early approval of decision support tools/algorithm for trading through non-Neat front-end,” NSE informed its members in a circular this week. “Accordingly, to facilitate efficient and speedy approval of the decision support tools/algorithms, the approval process has been revised,” the exchange said.

According to the circular issued by NSE, the decision support tools/algorithm applications submitted by the members would be categorised in three ways —approved algorithm through computer-to-computer link (CTCL), non-approved algorithm through CTCL and direct market access algorithm.

Vendors who want to identify their decision support tools/algorithmic trading product offerings to trading members as “approved algorithm” will have to apply to the exchange in a prescribed format. The exchange will identify the vendor’s product as “approved algorithm” on fulfilment of the conditions specified by the Securities and Exchange Board of India (Sebi) and NSE.

For non-approved algorithm through CTCL, members would be required to give demonstration of the automated risk-management features for each decision support tool/algorithmic trading product, NSE said.

For members using non-Neat front-end, NSE has proposed to provide a separate category without Neat login facility along with the current categories of users. “Members are requested to note that such a category of users shall not be allowed to login/trade through Neat/Neat-Plus. Members will be required to build additional back-up facilities for exigency. This category of users will not be required to provide any certification as they do not have trading eligibility,” the exchange said.

The procedure to request for such user IDs would be provided separately, NSE said.