Should high-frequency trades be tightly supervised? What Citigroup’s Nikhil Kohli says 

Nikhil Kohli, Head of Equities in India at Citigroup Global Markets India on Friday said high frequency trading (HFT) has become a big portion of market globally and one does need regulations. Whether it needs to be tightly supervised, or any 'speed bumb' should be introduced, is debatable, Kohli said.

"If you look at the trends globally, retail participation, everywhere is increasing. The two pockets of investor concentration is retail and HFTs. They do balance each other out. But you do need regulations," Kohli, speaking as a panelist at Global Securities Markets Conclave (GSMC 2.0) said.   

The panel discussion, hosted by Gift IFSCA, revolved around 'speed bumps' to curb HFT. This also discussed market structures, algorithmic trading, retail participation, and the rise of alternative trading venues. 

"You do need basically equal access. You do need to ensure that HFT as a trading class does not become too dominant. I think it has found its equilibrium," Kohli said. 

The Citigroup Global Markets' India head of Equities said HFT as an class peaked at around 60 per cent of trading volumes to around 50 per cent in the US at present. For India, it is around 30-40 per cent, right now, he said. 

"I think that is probably where HFT serves its purpose the best, because at the end of the day, they are liquidity provider. They are very important. But you cannot have a situation where they suddenly become 75-80 per cent of the market," Kohli said.

Murray Steel COO - APAC, Qube Research & Technologies, another panelist, said HFT is, by definition, a not source of competitive advantage. He called it a style of trading. "Lots of HFT traders are actually providing liquidity. They are making markets. There sheer constant orderbooks, academic studies have shown, thousands bit of spreads, actually improve transaction cost for retail players. Its a style of trading rather than an obvious advantage" he said.

He said where 'speed bumps' are introduced, HFTs are generally offered access in terms of time. Exchanges have to still make sure, as they are liquidity providers, they should be offered incentives such as market-making schemes. Steel said markets will evolve. He said there was a time when even electronic trading was brand new and possibly intensified the 1987 US market crash.