India’s GIFT City Regulator Moves to Tighten Algo Trading Controls

Algorithmic trading has surged in India’s GIFT City, driven by retail investors seeking faster execution and lower costs. To ensure orderly markets, the IFSCA has issued a consultation paper proposing stricter oversight of algo trading practices.

Key Highlights:

• Mandatory Permissions: Market participants must obtain prior approval from exchanges before engaging in algorithmic trading.
• Algorithm Audits: Exchanges will be required to audit both existing and prospective trading algorithms to verify compliance.
• Risk Controls: Systems must demonstrate adequate safeguards to prevent disorderly trades and maintain market integrity.
• Dummy Filters: Proposed filters on securities without price bands to curb excessive algo-driven volatility.
• Investor Protection: The framework aims to balance innovation with robust safeguards, ensuring retail investors are not exposed to undue risks.

These proposals reflect India’s broader push to strengthen financial infrastructure while positioning GIFT City as a global hub for innovation and secure trading. Stakeholder feedback on the consultation paper will shape the final regulatory framework.

Sources: Reuters, Business Standard