Selecting a Broker for Algorithmic Trading in India: An Overview

What is algo trading?

The term "algorithmic trading" refers to the employment of advanced mathematical models to generate trade orders that are then automatically executed. Even by a fraction of a second, faster access is thought to be capable of generating substantial profits for a trader. There is no algo running on the investor's machine, but rather on the broker's systems. An order is automatically placed on the investor's account whenever it also generates a signal without the involvement of either the broker or investor. If a predetermined set of conditions is met, the algo trading system will automatically place an order. As a result, the algo trading brokers in India no longer has to watch livestock prices and manually make orders to buy and sell.

What has Sebi come up with?

Sebi stated in a consultation document that an Algo trading regulatory framework is required. Algo orders should be tagged with the unique algo ID issued by the stock exchange approving the algo, according to the Sebi, and the APIs to carry out algo trading should be labeled with the unique algo ID. Exchange permission is required for any algos used by the stockbroker. According to a Sebi report, all algo trading strategies, whether employed by brokers or clients, must be approved by the exchange and, in keeping with existing practice, must be certified by CISA/DISA auditors (Certified Information Systems Auditor).

What is the purpose of the API, and how does it work?

Many stockbrokers in India are now providing API access to their clients, which provides an online connection between a data source (stockbroker) and an end-user (software developer) (client). It allows investors to employ a third-party application that meets their feature requirements or investors with technological talents to construct their own front-end features. It is possible to test a trading or investment strategy using these third-party tools. Investors are taking advantage of these APIs to automate their trading activities. Even though brokers can recognize orders coming from APIs, they cannot tell the difference between algo and non-algo orders, according to a Sebi paper.

Choosing an Algorithmic Trading Broker

Because of the intense rivalry in the Indian stock broking sector, choosing an Algo trading broker is quite simple. As a deciding element in broker selection, traders no longer look at low brokerage rates as an important consideration. When selecting an Algo trading broker, keep the following factors in mind.

1. Selecting Broker Based on API

2. Exposition and margin

3. API Fees Per Month

Selecting Broker Based on API

In computing, API refers to a set of standards for creating software applications. Automated trading may be achieved by simply integrating APIBridge with Amibroker/Mt4/NinjaTrader/Python/Excel etc.

Exposure/Margin

It is common for traders to expect a big margin from APIBridge because of the risk control provided by the decision logic. Negotiation for margin can be done by the exchange rules and your personal trading style.

API Charges per Month

API costs might range from zero to Rs. 2,000 per id per month depending on the type of API. Depending on how much money you intend to make each month, you'll also have to pay brokerage fees. Choosing a broker with minimal monthly (software + brokerage) fees is smart.