Man vs Machine: Exchanges find algo trades too hot to handle

By Santanu Chakraborty

India’s flash boys are discovering that even the biggest emerging market for computerised trades has its limits.
In just five years, high-speed and algorithmic traders have gone from bit players to a dominant force on Indian exchanges, enabled by a technological arms race between the nation’s top exchanges that cut transaction times to tiny fractions of a second. Now, as some of the country’s largest brokerages call for tighter regulation, those same bourses are starting to explore whether speed traders should be reined in.

NSE is considering higher fees for traders who flood the market with unfilled orders, while BSE, has called for "corrective action" to address the harmful side-effects of high-speed strategies.

Critics of India’s supercharged market structure say it’s raising costs for long-term investors, introducing little-understood risks and distracting exchanges from what should be a priority: getting more of India’s 1.25 billion people to put their savings to work in the country’s capital markets.