While supporting the generation of profit and wealth through algorithm trading, the Finance Ministry on Monday stressed on necessary safeguards that would prevent the disruption of markets.
“The basic objective of market participants is to increase their wealth and profits and there is nothing wrong with it,” said Subhash Garg, Secretary, Department of Economic Affairs, adding that policy makers and regulators have to facilitate better algorithm writing.
But pointing out that algorithms can also be used to create disruption in the markets such as flash crashes, a non-competitive environment or an unfair advantage, Garg stressed that this should not be allowed by regulators or policy makers.
He was addressing a seminar on Policy and Regulatory Framework for Algorithm and High Frequency Trading in India.
Finance Secretary Ashok Lavassa, who also addressed the conference, also spoke on the need for ethical practices in algorithm trading due to cases of market manipulations in the past.
“Regulators, policy makers and managers of markets have to ensure that this is dealt with,” he said.
The two top Finance Ministry officials also spoke about improving the access of algorithm trading and removing disparities between retail and institutional players.