Showing posts with label algorithmic trading. Show all posts
Showing posts with label algorithmic trading. Show all posts

Wednesday, June 10, 2015

India’s deceptive Constitution | Chintan

Every written constitution is supplemented by important unwritten principles: the constitutional law of all nations (whether or not they have a codified Constitution) consists of some combination of the written and unwritten. Judges interpret the abstract language of written constitutions and speak where the text remains silent. As a codified constitution grows older, it forms less and less of the constitutional law of a nation, having been supplemented by judicial decisions and political practice over time. But what happens when constitutional law diverges from the written constitution to such an extent that it is not just a ‘radically incomplete statement’ of the higher law but, going a step further, is positively misleading?
Deceptions in provisions
The Indian Constitution is transforming into a deceptive one — several constitutional provisions misrepresent what the existing constitutional position is. Most conspicuous among these are Articles 368(4) and (5), which categorically provide that there is ‘no limitation whatever’ on the power of Parliament to amend the Constitution. In the most famous case in the Supreme Court’s history (Kesavananda Bharati v State of Kerala), the Court assumed the power to strike down constitutional amendments that altered, destroyed, or abrogated the ‘basic structure’ of the Constitution. Articles 368(4) and (5) thus have no effect, and Parliament’s power to amend the Constitution is unquestionably constrained. Similarly, Article 31B — a clause intended to protect legislation inserted into the Ninth Schedule of the Constitution ‘notwithstanding’ the judgment of any court — does not, by virtue of a succession of Supreme Court judgments, fully insulate legislation from judicial scrutiny. Instead, courts can test legislation inserted into the Ninth Schedule on the basis that it abrogates fundamental rights that form part of the basic structure of the Constitution. The deception espoused by provisions of the Indian Constitution is fairly unique. In most other nations with written constitutions, the divergence between the text and practice arises on account of the difficult of formally amending a constitution, coupled with the need to modernise a constitution’s functioning. As Tom Ginsburg and other scholars observe in the context of the U.S. Constitution, judges “have filled in the details of the vague 18th century document to make it suitable for modern life”. In contrast, the Indian Constitution has proven relatively easy to change, and has been amended more than once a year on average. The deception in India has arisen on account of the fact that even though the Indian Supreme Court has the power to strike down or set aside constitutional amendments, it has no power to repeal them, which means that many ineffective provisions of the Constitution remain on the books. Parliament is the only institution that can change the Constitution to more accurately reflect the true constitutional position, and, so to speak, force the hand of the publishers.
This discussion has an interesting bearing on one of the most important cases currently being heard by the Supreme Court — the challenge to the constitutional amendment that sought to change the way in which judges of the Supreme Court and High Courts are appointed. Under the system, as it existed before the amendment, the power to appoint judges effectively belonged to a collegium of the senior-most judges of the Supreme Court.
Parliament attempted to transform the appointments process by amending the Constitution to establish a six-member National Judicial Appointments Commission. Naturally, as it stands, the constitutional text contains provisions explaining the modalities of how the Commission is to perform its task. In the event that this constitutional amendment is struck down, we will be left with a situation in which the Constitution refers to an appointments process by a body that neither had an inaugural meeting, nor appointed a single judge.
Deception may not be seen as much of a problem for lawyers. However, it represents a major access barrier for members of civil society who, quite understandably, refer to the constitutional text as the first (and often, only) port of call in understanding what the constitutional position is. Aside from its symbolic significance, one of the benefits of a codified constitution is that it generates awareness about the processes of government.
The National Democratic Alliance government has promised to repeal hundreds of obsolete statutes, including many that have been struck down, as part of a legislative clean-up exercise. It is more perilous to envisage the same being done for the Constitution — the concern always being that any government in power will silently remove an inconvenient provision of the Constitution too, appropriately sandwiched between groups of obsolete provisions. Perhaps all that can be done, then, is to encourage people to continue reading the text of the Constitution as a starting point — but warn them that what you see is not necessarily what you get.

(Chintan Chandrachud is a PhD Candidate at the University of Cambridge.)

Source: http://www.thehindu.com/opinion/op-ed/indias-deceptive-constitution/article7295299.ece

Tuesday, February 3, 2015

algorithmic trading

In algorithmic trades, the trader feeds a computer programme into the system and allows that program to put in all his trading orders and execute them too. These are very high speed transactions which help in securing a deal on the stock market within no time
There are many different types of algo programmes. Some of these programmes sclice the order into bits and spreads out the orders through the trading session so that the price is not unduly affected by the order.
Also some of these identifies anomalies between the price of an asset in different exchanges or markets and cashes in on these differences
These algos though harmless,can be used for underhand activities as well like bluff trades so that other programmmes reveal their intended trades.
Effects of algo trades on stock markets :
1. Market volatility : increase in thr unhedgable risk and thus a decrease in risk-adjusted returns
Ex: Flash Crash of 2010,USA
Knight capital case,2012
2. Increase in liquidity
3. These trades have an unfair advantage because they put in the trade before other investors become aware of it. Thus adversely affecting other investors .
4. Some of them also bombard the stock exchanges with multiple orders thus swamping the system
On the indian NSE these trades account for about 45% of the equity derivative market. Regulators worldwide are finding means to regulate these trades. However, they are hard to regulate as these trades have grown so big in number that they cannot be banned without causing serious harm to market’s liquidity and price discovery process.