Is the retail trader allowed full Automatic trading in India? Is it legal?
The short answer is YES. To know how to use fully automated system we will need to understand whether a broker is offering algo trading through a CTCL or IBT. If you are just looking for help in ATS setup, you can enroll for Amibroker for Professional Strategy Design and Algo Trading (APSAT)
Also read: Algo CTCL Terminal for Sub-brokers
Full Automatic Trading through CTCL
As per NSE/MCX circulars, algo trading facility can be provided through CTCL ID. The exchange does not say anything about fully-automatic or semi-automatic. Thus for authorized algo trading, a trader needs a CTCL Id. Let us now look at the requirements for CTCL.
A CTCL terminal can be provided by broker to their authorized dealers only with proper checks. As per NSE requirements, the CTCL id can be allocated to only a dealer who has passed NISM series 8 exam for the respective NSE segment. For MCX, any exam certification is not required for CTCL ID.
Symphony’s Presto is an example of CTCL; also note that Symphony is an empanelled vendor for NSE.
Full Automatic Trading through IBT
IBT stands for Internet Based Trading. Brokers may also provide ATS though IBT- such NEST, NOW and ODIN. A very common example is trading through Nest Plus- a plugin provided by Omnesys. You can integrate excel, amibroker or even matlab using the Nest Plus. Interestingly, there are no specific exchange circulars/guidelines for algo trading through IBT. The Bracket Order provided in IBT Terminal is also considered as ATS product by NSE/MCX.
Other than Nest Plus, there are also many quack vendors which provide a robo/ats plugin for Nest/Now/ODIN. Such plugins are basically macros which automate the process of reading a signal generated through Amibroker and pushing the relevant order in the IBT.
The Zerodha’s PI and Sharekhan’s TradeTiger are also approved IBT which may be used for automated trading.
Algoji members have found stability issues when trading with IBT; hence we recommend algo trading only through CTCL as per NSE guidelines.
Full Automatic Trading without using CTCL or IBT
Since the CTCL costs are usually high and IBT platforms do not offer stability, people have found another jugaad for algo trading which does not use either CTCL or IBT. Yet it is completely legal.
The trick is very simple. Setup your strategy software such as excel, amibroker or ninjatrader to send automated emails whenever a signal is generated by strategy. This email should be sent From your email ID registered with your broker, to your RM/Dealer who will swiftly place the trade and confirm you back. You can also specify the dealer pre-conditions such as stop loss, profit target or max slippage.
Slippage means the max cost you are willing to give to trade a signal. Suppose your strategy generates a Buy signal at 8500.00, and you do not want to buy at price higher than 8505.00, then the slippage will be 5 Rs.
The limitation of this jugaad is that there will be a latency of minimum minute from the time signal is generated to order being placed. Still, using max slippage parameter, it can be controlled.
Full Automatic Trading using Windows Macros
It is possible to automate your trading strategy independently of broker or charting software through windows macro scripting. For full details please read: Automated Trading Software for NSE/MCX/BSE/NCDEX (Broker Independent)
Relevant Exchange Circulars
- Broad SEBI Guidelines on Algorithmic Trading, dated May 21, 2013. Read here
- Broad SEBI Guidelines on Algorithmic Trading, dated March 30, 2012. Read here
- NSE Circular dated July 8, 2011 (.pdf)
- NSE Circular dated dated August 25, 2006 (.htm)
- NSE Circular dated August 24, 2005 (.htm)
- Initial NSE Circular dated May 12, 2000