Future of Algorithmic Trading in India – Reshaping the Stock Market


Algorithmic Trading uses automated pre-programmed trading conditions to execute real-time orders on the stock exchange. Since 2008 algorithmic trading has gained prominence in Indian markets and they effectively use market inefficiencies to their own advantage.

Automation is the natural passage for any technology of the future. Since investing is a process, it will translate better into algorithmic trading. Although Algo's trade is in its infancy stage in India, it accounts for almost 50 percent of overall trade. The amount is very low compared to the US and UK markets where over 90% of transactions (at much higher volumes) are done using algorithms.

The Indian market offers a decently good opportunity for Algo traders with its

• intelligent order routing system

• co-location facilities and sophisticated technology in the two main exchanges

• well-established and liquid exchanges

The Indian market is taking the increasing trend and demand for HFT and algorithmic trading by educating its members on the technology. It also helps them develop the skills to help them understand the complications of trading.

For the Indian Algo trading scenario, Mr. Richard Gula says, "Expect highly sophisticated development from Algo, but likely focused on a relatively small number of liquid stocks. Liquidity will define success in liquidity. ; effort. Regulatory problems could multiply. " Mr. Gula has been developing and deploying databases on stocks, futures, ETFs, and building, managing and using financial databases since 1975.

Mr Gula further states that the Indian market should be approached with a distinct strategy which should consist of:

• Identify the good actions that drive the market

• Study and understand the whole Indian market

• Understand the habits of former traders and extract information

• Create specific market rules to drive algorithms at the macro scale

• Create custom algorithms for each stock for frequently traded stocks

Speed ​​is essential when HFT executes trades in less than a few milliseconds – traders will need algorithms and solutions that offer low latency and faster computation.

As the market changes every day, statistical models require constant adjustments. It is already evident that algorithmic trading is used by investors to customize algorithms and automate their trading strategies in order to manipulate their goals. There is also the use of artificial intelligence solutions capable of adapting to changing markets. These systems will be able to use news, satellite images, social media feeds, etc. to predict market trends.

However, the introduction of Algo trading in Indian stock markets – one of the most liquid open markets in the world – aims to improve the trading market. India can easily open up to foreign investors, they would go for Algo trading to a great extent. Algo trading is fast becoming the future of the markets, with minimal cost and risk in executing an order.

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