Buy-side on Algos in India


Prudential Asset Management (Singapore) Ltd.’s Sanjay Awasthi , Director, Central Dealing Desk, discusses what he looks for from broker algos and the need for adapting algos to the Indian markets.
How has SEBI’s approval of smart order routers changed your order flow?
We are not users of smart order routers because of the additional complexity resulting from the differences in the settlement processes amongst both the exchanges in India. An illustration of this complexity is in respect of the denoting of price by decimal places. While NSE has a 4 decimal place pricing, the BSE has a 2 decimal place pricing. This mandates  a segregation of fills, which can result in difficulties, especially in a market like India where the average trade size is small and consequently, the number of fills is very large. Also, as yet, we have not really seen any significant advantages in the use of smart order routers.
Are your algorithms primarily developed inhouse or by your brokers?
At Prudential Asset Management (Singapore) Ltd, we rely on brokerprovided algorithms. However, from time to time we may request brokers to customize certain algorithms to help us execute trades in the best interest of our clients.
Do you use algorithms for trade execution, to spot opportunities or both?
Algorithms are used for trade execution. From a trader’s perspective, algorithms help to give greater control of the manner of the execution. In Indian markets, using algorithms ensures anonymity and gives better control on execution.
Is there a difference between the type of algorithms you get from Indian brokers and from international brokers?
Most broker algorithms are commoditized in the sense that the offerings across brokers are pretty much the same for a particular market. This however does not hold true across markets. Most standard algorithms need to be customised to match the market micro structure of each market. To illustrate, in India a volume inline/participation algorithm has to be tweaked to ignore block deals which go through in the normal segment.
What new algorithmic products or services would you like to see more of from your brokers?
We are quite satisfied with the existing algorithms provided by our brokers. In future, we would expect brokers to help customise the existing algorithms to suit our specific requirements  which are essentially those of our clients’. This would also entail more research services from brokers on market micro structure.
*Prudential plc, incorporated and with its principal place of business in England, and its affiliated companies constitute one of the world’s leading financial services groups and has been in existence for over 160 years. It provides insurance and financial services directly and through its subsidiaries and affiliates throughout the world. Prudential plc is not affiliated in any manner with Prudential Financial, Inc, a company whose principal place of business is in the United States of America.