Whalesbook
Regulatory Overhaul for Algorithmic Trading
The International Financial Services Centres Authority (IFSCA) is set to implement a stricter regime for algorithmic trading in GIFT City. A consultation paper released on January 20 outlines several key proposals designed to manage the burgeoning use of automated trading strategies on local exchanges.
Safeguarding Market Integrity
Central to the proposals is the requirement that any market participant wishing to engage in algorithmic trading must first obtain explicit permission from the relevant exchange. This move seeks to ensure that only compliant and properly vetted entities can deploy automated systems. Furthermore, exchanges will be empowered to audit the algorithms of both existing and prospective participants to verify their adherence to regulatory standards and prevent potential misuse.
Deterring Manipulation and Ensuring Order
The IFSCA also plans to introduce "dummy filters" for securities that lack price bands but attract significant algorithmic interest, aiming to mitigate volatility. Bourses will gain the flexibility to impose "financial disincentives," such as penalties, on participants who exhibit a high ratio of orders placed versus executed trades. This measure is intended to provide a strong deterrent against order flooding and other manipulative practices, thereby fostering orderly trading conditions and preserving overall market integrity.