Rakesh Jhunjhunwala questions need to regulate algo trading

Amid heated debate on algorithm based trades, ace investor Rakesh Jhunjhunwala today backed this form of trading, and questioned the need to regulate it.

"I don't agree there should be regulations for algorithm (algo) trading," Jhunjhunwala told reporters here.

"Norms to regulate algo trading should be brought in only if there is enough evidence of market manipulation", he said.

"An investor can use any method for trading, it could be technical as well but that does not mean its incorrect...I don't agree that just because someone is doing algo trading he should be regulated," he said, adding "there should not be any regulations unless evidence is found that the trades are being done to manipulate prices (in the stock markets)".

Markets regulator Sebi is reportedly working on a new set of norms for algorithmic trading, which refers to orders on bourses that are generated using high-frequency and automated execution logic.

Jhunjhunwala was speaking at the launch of a trading and investment platform -- Selfie -- by stock brokerage Geojit BNP Paribas.

The trading platform, which would give users absolute control over their trading with timely research inputs, aims to cater to tech savvy individuals, especially the youngsters.

There have been certain instances of abnormal market movements which have been attributed, by market experts, to algo trading.

The increasing volume of algo trades and their attendant risks have forced regulators the world over to have a closer look at gaps in the existing regulations and explore ways of strengthening them.

The Reserve Bank, in a report, had also warned against the rising popularity of superfast algorithm trading, saying its complex coding and ultra-low latency due to its advanced communication platforms increase risks of erroneous trades and manipulations in stock markets.