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No plans to implement co-location facilities in commodities, says Sebi official

Even though there is a demand and there are requests to implement co-location facilities in the commodities market, the market regulator said that it do not think that it is time for allowing the facility in the segment.

Speaking to reporters S K Mohanty, executive director, the Securities and Exchange Board of India (Sebi), said that while algorithmic trading (algo trading) is part of trading strategy and is more applicable to non-agri products, the market regulator has not thought of bringing in co-location facilities in commodities.

“We have not thought of co-location in commodities. We dont think it is time for it. Definitely there is a demand and there are requests, but we havn’t thought of it,” he said.

There has been an argument that algo trading, which uses electronic systems to execute large number of orders in short timeframe, and co-location, which is setting up of servers in the premises of exchanges to reduce the time taken for orders to hit the exchange, are providing more advantage to a few traders.

Mohanty said that no broker has their server in the premises of the exchanges, in commodities, and it has been denied from the time of Forward Markets Commission (FMC) and is continued even after the merger.

Speaking about the implementation of central KYC, he said that while there are some confusion regarding the new KYC, it will be in place for quite some time and the stakeholders has to comply with the norms. He added that while six new commodities, including diamonds and eggs has been added to the list of commodities notified for trading, the exchanges are yet to look at them.

“There are around 91 commodities listed and only around 35 are being traded through exchanges as of now. It is up to the decision of the exchanges and they will have to do lots of research and preparations before starting a new commodity,” he added.

He said that almost 95 per cent of the complaints Sebi receives are that the broker has cheated the customer and lack of proper awareness on the market related matters are the key challenge.

                                                                          – Source (Business Standard – October 13, 2016)